On Thursday, August 25, gas prices in Europe reached their highest level in five months.

During the auction, the cost of fuel at the TTF hub in the Netherlands for the first time since the beginning of March exceeded $3,200 per 1,000 cubic meters.

m. This is evidenced by the data of the London Stock Exchange ICE.

Analysts interviewed by RT associate this state of affairs with the general shortage of gas on European trading floors.

Limited supply forces traders to stock up on raw materials for the future, which puts pressure on stock prices.

This opinion was expressed in a conversation with RT by the head of the analytical department of AMarkets Artyom Deev.

“For six months, the gas market has been experiencing a variety of shocks: from European sanctions against Russia to the shutdown of Russian gas pipelines or an accident at the largest liquefied natural gas plant in the United States.

At the same time, the hot and dry summer has become a new, unforeseen factor that leads to another jump in the value of the asset,” the expert explained.

July 2022 is recognized as one of the six hottest in Europe on record, according to data from the Copernicus Earth Observation Analytical Program.

Thus, the temperature rose above +40 °C in Spain, France and Great Britain.

At the same time, the region experienced record low rainfall.

For example, for the French Republic, July was the driest month since records began in 1959.

“The current drought could be the worst in at least 500 years.

This is the first assessment - we must confirm the data at the end of the season, ”said the representative of the press service of the European Commission at a briefing.

Non-alternative energy

Hot weather is slowing down alternative energy production, aggravating fuel shortages in Europe, analysts say.

According to the research center Ember, the generation of hydroelectric power plants in European countries in July in annual terms decreased by 15% to 57.8 TWh.

At the same time, electricity generation at nuclear power plants decreased by almost 14%, to 74.2 TWh.

“Severe rainfall deficits have affected river flows in large parts of Europe.

The reduction in water supplies has hit the energy sector hard, affecting both hydro generation and the cooling systems of other types of power plants,” the European Commission (EC) report, which focuses on the impact of drought on energy generation in the region, says.

According to the organization's specialists, in early August, due to the high temperature of the water in the Garonne River, EDF, the operator of nuclear power plants, reduced electricity generation at nuclear power plants in southwestern France, and also issued warnings about reactors located along the Rhone River.

In Portugal, water reserves for hydroelectric power generation are currently less than half of the average of the last five years, EC representatives emphasize.

  • Isar nuclear power plant in Germany

  • AFP

  • © ChristofSTACHE

The normal operation of the HPP is directly related to the supply of a sufficient amount of water to the station, emphasized Valentina Milashevskaya, a specialist in the commodity and raw materials markets of the Finmir marketplace.

As the analyst explains, falling water levels could render the turbines unable to spin, preventing electricity from being generated.

“For the operation of a nuclear power plant, it is also necessary to have nearby lakes or full-flowing reservoirs, because the water from them is used for the reactor cooling systems.

Do not forget about the need for a sufficient water level in the rivers and reservoirs of Europe, as coal is delivered through them for thermal power plants.

If the possibility of delivery through the numerous waterways of the Old World disappears, then the cost of diesel fuel will also skyrocket, ”the interlocutor of RT noted.

Dear coolness

In addition, abnormally hot weather forces Europeans to spend more energy on air conditioning systems, which increases the overall fuel shortage.

Fyodor Sidorov, founder of the School of Practical Investment, spoke about this in an interview with RT.

“Natural gas as an energy resource is used to generate energy, which is necessary for irrigation.

The consumption of electricity by cooling devices - air conditioners is also increasing.

As a result, raw material prices are rising in conditions of high demand,” the expert emphasized.

Abnormally high temperatures create a shortage of goods, exacerbate the inflationary crisis, which leads to a sharp rise in the cost of goods and services, experts say.

According to Eurostat, since the beginning of March, inflation in the euro area has accelerated to 8.9% in annual terms.

The value became the maximum for the entire time of observation.

At the same time, prices for energy resources for the population and industry increased the most.

“Ultimately, the increase in the cost of energy always hits the consumer of goods.

Therefore, Europeans may see an acceleration in inflation in the coming months in the form of changes in prices on the shelves in stores, because entrepreneurs will be forced to shift their electricity and other expenses onto the shoulders of consumers,” Milashevskaya said.

On Thursday, August 25, the average price of electricity in a number of EU countries exceeded the mark of €700 per MWh, having renewed its historical maximum.

This is evidenced by data from the Nord Pool exchange.

Thus, in Austria the figure reached €707.4 per MWh, in France — €706 per MWh, and in Belgium the price level rose above €700.4 per MWh.

In such conditions, the European authorities are trying to slow down the rise in the cost of resources by artificially reducing demand.

In particular, on August 5, the EU countries finally approved the decision to reduce gas consumption by 15% by the end of March 2023.

The initiative provides for a forced reduction in the use of energy raw materials in the event of an acute shortage of fuel in the countries of the association.

“The lack of energy for any region of the world, especially such an industrialized one as Europe, threatens to stop the economy and many processes familiar to people.

Without electricity, equipment in any industry does not work, shops, ATMs and offices do not work, as well as traffic lights, the subway, and so on.

Interruptions in the supply of electricity can plunge any metropolis into the stone age in just a week, ”Fyodor Sidorov emphasized.

According to experts, an increase in Russian gas supplies could reduce the serious shortage of supply in the European market.

Earlier, due to restrictions from Poland, the European Union stopped receiving gas through the Yamal-Europe pipeline, and Ukraine halved the transit of Russian raw materials through its territory.

In addition, since the beginning of summer, gas pumped through the Nord Stream pipeline has dropped by almost five times, to 33 million cubic meters.

m per day (only about 20% of the total capacity of the main line is used).

At the same time, from August 31, the supply of fuel through the gas pipeline will be completely stopped for three days.

Stopping the delivery of gas from Russia risks exacerbating the energy crisis in the eurozone countries and slowing down the pace of filling gas storage facilities.

Under such a scenario, it will be very difficult for Europeans to get through the heating season without forcibly disconnecting some consumers from energy, Valentina Milashevskaya believes.

“Residents of Europe will have to save on heating residential buildings and public institutions this winter.

Also, the closure or suspension of the work of enterprises will affect the salaries of Europeans and their ability to buy food.

The economy of the region will also suffer, because the collection of taxes will decrease due to the closure of companies and the reduction in spending by the population,” the expert concluded.