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Germany And Europe Set For Energy Rationing After Russian Gas Cuts

German gas importer Uniper has said that the country does not rule out undertaking gas rationing at some point following Russia's decision to indefinitely halt gas flows via the Nord Stream 1 pipeline.

Uniper, Germany's biggest importer of Russian gas, says it’s also considering legal action against Gazprom to compensate its shareholders for a 90% drop in the company’s market value following a sharp drop in Russian gas supply since June.

"We cannot rule out that Germany might look at rationing gas as something that might have to be considered. We know that the government wants to avoid this as much as possible because that would be a disaster for so many reasons," CEO Klaus-Dieter Maubach has told Reuters.

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Europe's gas prices surged 26% on Monday after Russia stopped pumping via Nord Stream 1, a major supply route to the continent. 

On Friday, Gazprom shut Nord Stream indefinitely after claiming it had found an oil leak at a vital pipeline turbine, blaming Western sanctions and vowing to keep the pipeline offline until sanctions were lifted. That announcement follows a G7 announcement of an agreement to implement a price cap on Russian oil by December, with Moscow responding by threatening to stop selling oil to any country that supports price caps.

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But it’s not just Europe’s largest economy that might be forced to go to extremes to preserve its gas stockpiles especially during the upcoming winter season. The rest of the continent might be forced to follow suit if the season turns out to be more severe than expected.

Gas rationing will come at a heavy price: the partial shutoff of gas deliveries is already affecting European growth momentum, darkening the Eurozone outlook. 

Indeed, the Eurozone economy GDP is expected to grow by 2.4% in 2022 but slow down to 1.3% in 2023. The world’s largest chemical producer, BASF, says it’s closely monitoring the natural gas markets and could cut production if needed.

By Alex Kimani for Oilprice.com

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