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Oil Falls As Markets Fear Further Action From U.S. Fed

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IEA Chief: Europe Must Cut Gas Usage 20% To Survive Winter

After calling on all member states to reduce gas consumption by 15% in the face of the threat of a complete Russian gas cutoff, the IEA says the European Union will need to cut even more in order to get through the winter. 

"Even if there is no single accident... #Europe still needs to reduce its gas consumption about 20% compared to today in order to have safe and normal winter months,” IEA chief Fatih Birol said, issuing what he called a “red alert” for energy markets. 

The short-term issue with the Nord Stream 1 pipeline may have been resolved, Birol told CNN, but “it’s too early to be happy about this”. 

The amount Europe is receiving now from Russia is only about one-third of what it was receiving prior to the force majeure, and the IEA chief warned that even that reduced flow “can be cut anytime”.  

After a 10-day pause for regular maintenance, Russian gas flows via Nord Stream resumed on Thursday morning, with orders for gas set at around 40% of Nord Stream’s capacity, the level from before the maintenance after Russia slashed flows in mid-June. Flows early on Thursday were at around 21.5 GWh, compared to 30GWh prior to the start of maintenance on July 11th, and compared to 70 GWh before Russia reduced supplies by 60% on June 13th. 

On Wednesday, the European Commission unveiled measures for the bloc to conserve gas to pre-empt a Russian cutoff, asking member states to reduce consumption by 15% until next spring. 

According to Birol, this won’t be enough to ensure a smooth winter for Europe, and there is no alternative to consumption reductions. 

Even assuming that the current Russian gas flow is maintained, and considering all the LNG Europe is getting from the United States and elsewhere, plus other natural gas sources, and even if there are no accidents that hamper supply, Europe still needs to reduce more, starting now, Birol said. 

There is not enough gas around the world for Europe to rely on, the IAE chief said, and there is no choice but to reduce consumption to avoid shortages and rationing this winter. If the bloc waits, and fails to adopt a coordinated method, once we get into the winter months, the measures will be “more drastic”. 

Birol is calling on Europe to develop an emergency plan, noting that Germany is the most vulnerable, followed by Italy and some Eastern European countries.

By Charles Kennedy for Oilprice.com

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  • Pavan Patel on July 21 2022 said:
    do we need to cut our usage..? i thought we had tremendous demand destruction for energy in the EU?

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