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Ag Metal Miner

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Gas Shortage Sparks Energy Security Fears In Asia

  • Russia’s invasion of Ukraine and the subsequent sanctions and gas supply disruptions have sent shockwaves through the global economy. 
  • Currently, Russia supplies about 40% of Europe’s natural gas.
  • If the EU sticks to its bottom lines and cut off Russian oil and gas supplies completely, the economic impact would be even more massive.

It’s no secret that Russia’s invasion of Ukraine has had a massive global impact. From the sanctions to the natural gas supply cutoffs, the economic toll is both catastrophic and far from over. Currently, economists and other experts are trying to predict how different parts of the world will react to the gas shortage. So far, estimates are not very cheerful.

Gas Shortage Already Hurting Both Europe and Russia

Most people working in commodities industries know that the Nord Stream 1 pipeline, which runs from Russia into Germany, was turned back on at only 20% capacity. In their announcement, Russia blamed turbine problems for the initial shutdown of the vital gas supply pipeline. However, many speculate the supply reduction was a maneuver by Putin to extort European nations over their Ukraine invasion sanctions.

Whatever the reason, Germany remains dependent on this vital gas supply to power its industrial sector, as well as the heating of German homes during the winter months. Germany’s undisputed position as the economic leader of the EU complicates the situation even further. The ongoing gas shortage and forcing the country to tap into its reserves and shut down parts of its industrial sector could have dire consequences for Europe as a whole.

But does this mean Russia has the advantage?

In the short term, perhaps. However, experts remain skeptical of how the move will play out in the long run. For instance, the EU continues to work on ending all of its Russian oil imports by the end of the year. According to a team of Yale analysts, this would prove crippling to Russia’s already beleaguered economy.

Indeed, strict sanctions on Russian commodity exports and global financial channels have already decimated the Russian Ruble. If Germany and other nations in the EU stick to their bottom lines and cut off Russian oil and gas supplies completely, the economic impact would be massive.

Energy Security Fears Growing Across Asia

Nevertheless, the Nord Stream 1 capacity cut and European gas shortage continue to cause anxiety, even over in Asia. For instance, nations like South Korea and Japan remain on edge that Europe may begin hoarding whatever oil and gas supplies it can. Some experts speculate this would result in the Asian nationals directly competing with Europe for gas supplies.

That said, nations like Japan may not be affected as significantly as some expect. After all, most of Japan’s crude oil comes from the Middle East. Even so, their dependence on foreign oil imports, in general, puts them in a precarious position. With very few oil reserves of their own, places like Japan and Taiwan are still susceptible to changes in the global marketplace.

Seeking Alternatives to Russian Gas

Currently, Russia supplies about 40% of Europe’s natural gas. Even alternative gas lines such as the Yamal–Europe gas line originate in Russia, despite being connected to Germany through Poland. Luckily, Norway is taking steps to help its European neighbors, recently increasing production to help offset Russian gas and oil dependency. The UK has also worked out deals with Norway’s Equinor, who will be able to help supply gas for the next three winters. The US will also aid Europe with more LNG to assist in the upcoming winter months.

However, these options could be more band-aids than solutions. For instance, Germany’s anti-nuclear policy eliminates the chances that such energy could be used to heat homes or power industrial sectors. And with the winter less than six months away, the need for Germany and other European nations to find alternatives to Russian fuel is more vital than ever.

By AG Metal Miner

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