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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Europe’s Energy Crisis Will Not Be “A One Winter Story”

  • As Europe races to get enough energy for winter, national economies are battling recessions, and energy giants battling bankruptcy.
  • Even if European countries manage to survive winter, as it appears they will, they will face similar struggles the following winter.
  • Oil markets are set for a very volatile final quarter this year, with prices soaring as the embargo on Russian oil comes into effect.

Reduced energy supply due to the sanctions against Russia and Moscow shutting down key pipeline gas export routes will leave Europe scrambling for oil and gas well after the coming winter as the current crisis is not “a one winter story,” according to analysts at consultant Energy Aspects.

“This is not a one winter story, let’s just make it very, very clear,” Amrita Sen, founder and director of research at Energy Aspects, told Bloomberg television in an interview on Friday.   

Europe will need to ration demand in order to be able to balance the market,  not only this winter but also the next winter and potentially the one after that, she noted.  

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The energy crisis is already pushing Germany – Europe’s biggest economy – into a recession, which will deepen as we head into the winter months amid the ongoing natural gas and energy crisis, Bundesbank, the central bank of Germany, said in its monthly report earlier this week. Germany also moved this week to nationalize its biggest gas importer, Uniper, to prevent a collapse of the German energy and gas suppliers. Across Europe, industries are forced to curb or shut down production due to soaring energy prices, and several European industry associations say the European Commission’s proposals to reduce energy prices and help households and businesses through the crisis are not enough to help them survive the winter.

Commenting on the oil market, Energy Aspects’ Sen told Bloomberg that the oil market would see a very volatile last quarter of this year. 2022 so far has been the year with the second-highest volatility since 1990, the highest volatility was seen in 2020.

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“We are expecting much higher prices into year end,” and Energy Aspects’ call for oil prices at year-end is about $120 a barrel, she added.

Early on Friday, Brent Crude was trading at $90 per barrel.

After the EU embargo enters into force, India and China in theory could absorb additional Russian oil, but the banking sector would be wary of secondary sanctions from the U.S. and this could cap Russia’s ability to export oil, Energy Aspects’ Sen said. In addition, Russia tying up a lot of oil on ships to Asia and then finding buyers would further raise freight rates, she added.  

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Mamdouh Salameh on September 23 2022 said:
    With global underinvestment in expanding the production capacity of both oil and gas and a continuing robust demand, energy prices could be projected to continue to rise for the foreseeable future.

    Therefore, the global energy market could be expected to get tighter whilst EU’s current disastrous energy crisis could also be expected to extend to may winters with horrendous impact on the EU’s economy.

    The global economy will continue to be driven principally by oil and gas well into the future. Therefore, a considerable and regular investment in oil and gas production capacity is quintessential for the survival of the global economy and also for global energy security.

    Moreover, the EU’s view that oil and gas assets could become stranded by 2030 is utter nonsense.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • George Doolittle on September 23 2022 said:
    This is correct.

    *AND SHIPPING LNG BY SHIP AIN'T CHEAP.*
    #move_along
  • independence01776 d on October 01 2022 said:
    Based on what the markets are telling us, the oil crisis is already over for Europe. Yes, most of the world is headed for a recession. But this is associated to supply chain disruptions on a much grander scale than Russia's cutting off EU natural gas. More to do with the democracies separating themselves from Chinese manufacturing and starting to look for reshoring industries. Also has to do with Covid of course and the economy disruption that resulting in printing of money to keep economies afloat and eventually pushed prices higher.

    Those things are behind us now, Russia is showing it will not win any war in the Ukraine, and Covid pandemic largely no longer a economic distruption. The shifting away from China by democracies will play out over the next decade with China the big loser unfortunately. China will eventually pivot to align with the democracies more. How long the CCP can retain total control will be interesting. My guess is that ends this decade as well.

    In the end, Germany and a few smaller nations are impacted significantly this year. Thermostats will have to be turned down a few degrees, prices for natural gas will remain elevated. But the global surplus of oil is here to stay as the world shifts away from gasoline and diesel to power vehicles. This will of course continue the decline in capital investors are willing to risk on a dying industry. Which will keep prices relatively high compared to the last decade. By 2030, energy around the globe will look a whole lot different.

Leave a comment




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