In Europe, we are facing the worst energy crisis
in at least 50 years.
We compare this with the first oil embargo in 1973,
but the current crisis feels even worse than that
because this time, it's a much wider energy crisis.
The crisis is really huge in terms of the price.
The price impacts homes, businesses,
industries, and the economy.
We see energy prices breaking record after record.
The consequences for households
and companies are not sustainable anymore.
We've got less customers coming in.
Our margins are smaller.
It's a perfect storm for disaster.
European economies, they are on the brink of recession,
so the winter is going to be tough around here.
Over the next few months,
Europe will face a high stakes puzzle,
how to keep the lights on with a substantial portion
of its energy supply suddenly gone.
To do that, countries are going to need
to maneuver the balance of supply and demand swiftly
and precisely and make hard decisions
about how to minimize the pain of this winter and the next.
Beyond that, Europe could be forced
to reconsider its reliance on fossil fuels
in what some see as the beginning
of a fundamental transformation of its energy system.
The old pattern of responding to every fossil fuel crisis
with a grab for more fossil fuels
is simply not tenable anymore.
If there is to be a silver lining
from this terrible traumatic year here in Europe,
it is that it has reset the energy debate forever.
The history of Europe and Russia on gas goes back
to the Cold War when Russia was not Russia
but the Soviet Union.
Slowly, Europe got in some ways addicted
to cheap Soviet and Russian gas.
It was plentiful, it was affordable, was around the corner,
and it really became the backbone
of the European industrialization.
Europe uses gas for heating, for industrial production,
as a feed stock, and as a energy source.
It uses gas for power production.
And natural gas is really, really important
for these economies.
Flows of Russian gas to Europe only increased
after Putin became president in 2000
and doubled down on Russian gas production
via the state owned energy company, Gazprom.
It's this gasfield
but it's the basis for Gazprom's power and wealth
and in turn Russia's revival as a power on the world stage.
By 2021, the EU was getting more than 40%
of its natural gas imports from Russia.
But looming behind all that cheap energy,
there was a problem.
While Russian gas was cheap, it was also a tool
for the Kremlin to exert political and economic pressure.
In this particular crisis,
Vladimir Putin saw the opportunity to use gas
as that tool to put pressure in Europe.
For a lot of people, the energy crisis began
when Russia invaded Ukraine in February.
But for us in the energy market, it began before that.
September, October of a year ago,
that's when Russia started to reduce supply of gas.
Europe is facing a worsening energy crisis
ahead of winter.
Gas prices have reached record highs
and supplies are running low across the block.
Russia blamed difficulties, it blamed problems,
but surely, it was cutting supply into Europe.
That meant that prices starting to go up,
reaching very soon record highs.
The situation got much worse into 2022,
particularly after the invasion of Ukraine.
Air raid sirens in Kyiv,
signaling that the full scale invasion
of a European country was well underway.
We saw prices skyrocketing because everybody was afraid
of how the battle would actually impact infrastructure.
And then we started to see
the western countries imposing sanctions.
Putin chose this war,
and now, he and his country will bear the consequences.
That's when we first started seeing supply cuts
from Russia to European countries.
Some hope Russia would continue exporting gas
to Europe in spite of the war.
But over the course of the year, that hope faded.
Supplies were gradually cut
over the summer on Nord Stream,
the big gas pipeline that brings fuel from Russia to Europe,
and then finally stopped.
And the market realized that really those supplies
probably weren't going to come back.
By late August, natural gas futures spiked
to more than seven times what they had been a year before.
Then, this happened.
Sabotage at sea.
That's what President Biden is calling the leaks
and explosions on the Nord Stream pipelines.
This is natural gas, highly flammable natural gas
that is bubbling to the surface.
It remains unclear who carried out the suspected sabotage
of the Nord Stream pipelines and why,
but the leaks sent an unmistakable message
about the vulnerability of Europe's energy infrastructure.
It was seen as the start
of a new chapter in this energy war.
Everyone then thought, "What if it's not a Russian pipeline
but it's a pipeline from Norway
into the European Union bringing gas supply
from the Nord Stream?"
If that was hit,
Europe simply will not have not nearly enough gas,
not even for the winter, even for the fall.
Now, Europe is headed
into winter with sharply reduced energy imports.
Whether some countries will make it through
without severe power cuts will depend on whether supply
and demand can be balanced and on how cold it gets.
For some of the most vulnerable citizens,
the stakes could be life or death.
If we have more people unable
to afford to heat their homes and sitting in the cold,
then experts expect there to be more deaths.
Below 13 degrees Celsius
is when you can have heart problems.
You know, these are problems that affect more the elderly
or people with existing conditions.
However, cold does kill people.
And it worries me for the economy,
you know, for the European economy.
You know, we have not enough energy,
rising interest rates, huge inflation.
Energy, this crisis has revealed,
is so integral to everything.
In hopes of averting a worse case scenario,
European governments are taking action,
addressing both sides of the dilemma, supply and demand.
On the supply side, it's trying to grab as much gas
as they can find in the international market,
particularly of liquified natural gas.
This is the big gas carriers that shape gas
from places like Qatar and the United States.
Liquified natural gas has really been the hero.
We've seen a very strong flow of LNG entering our ports,
in our terminals.
The problem is that Europe now faces actually
a lack of infrastructure to import that gas.
We can import gas from elsewhere,
but we are very limited by the amount
of LNG import facilities that we have in place.
And at the moment across Europe,
there are 25 of these facilities being planned.
We'll have the first couple this winter,
but through next year, we'll have more,
and that will definitely help.
But to really get imports scaled up,
new construction will be needed,
not just on the European side, but on the US side as well.
One of the dates that people look forward to is 2026
when a lot more US export LNG capacity comes online.
That is a long time away
and that's the problem with building infrastructure.
It takes time.
In the meantime, other more contentious sources of energy
will have to make up the shortfall.
The energy crisis in Europe has prompted
what we are calling a coal comeback.
These countries were really trying to get rid
of the most pollutant source of energy,
and in the short term at least, it won't be able to do so.
In Germany, which has struggled
to phase out coal in recent years,
the energy crisis has prolonged the practice
of razing small villages to mine
the lignite coal buried underneath.
Immerath was flattened to allow
for the expansion of this massive open cast coal mine
which supplies a local power station,
that is one of the most polluting in the whole of Europe.
So in the short term,
we are going to see probably emissions rising,
and this can really slow down European plans
to become climate neutral.
We are seeing also a nuclear comeback in some countries.
Even in Germany
where nuclear has been such a taboo,
now the government has decided to extend the life
of its remaining nuclear power plants.
Countries like the UK and Sweden
are also hoping to bring more nuclear power online.
Though, any new plants are years away from operation.
In the short term though,
nuclear is proving more of a hindrance than a help.
In a case of spectacularly bad timing,
about half of France's massive nuclear fleet
is currently shut down for repairs.
Normally with that huge fleet of nuclear energy,
France has been a proud exporter
of power to the rest of Europe.
They're now expecting to need imports of electricity,
and that changes the dynamic
for all the countries surrounding France.
So the UK, Germany, Spain,
everybody is going to have to send imports to France,
and that means that they've got less electricity themselves.
With no immediate way for Europe
to make up the shortfall in energy supply,
the other side of the equation comes into play,
reducing demand.
Many countries have drawn up guidelines for households
and businesses to voluntarily reduce their energy use,
such as limiting heating in offices,
turning off lights at night,
and using clothes dryers only at certain times of day.
The single most important measure
that European families can take
is reduce the thermostat down.
If we reduce the thermostat to 19,
probably something like 5 to 7%
of European gas demand could come off.
But much of the necessary reduction in energy demand
won't need any special push from governments.
It'll inevitably happen simply because prices of energy
and everything else are so high.
We are seeing some companies reducing output.
Some of them might not ever be able to get back
to the production levels from before the crisis.
Most of all the products have risen in price.
I'm saying everything's up, minimum 15, 20%.
Our margins are getting smaller, but also the footfall
of customers coming in is getting smaller.
The people need more money to live
'cause everything's going up.
You know, like you say, a lot of businesses,
they'll just call it a day.
Europeans are also feeling the extra squeeze
from their home energy bills,
creating a dire economic situation
for many low and middle income people
and sparking cost of living protests throughout Europe.
Don't pay UK means don't pay your energy bills.
Our goal is to get a million people striking.
In response, some countries have decided
to partially subsidize
their citizens' heating and electric bills,
which could cost governments hundreds of billions of euros
or pounds for this winter alone.
It also introduces problems
for the supply side of the equation.
The problem with the subsidies and the price caps
for the families is that they stop the price signal
from reaching household, and it means
that families do not have the incentive to save,
to economize, to try to consume less
than they did last winter.
So it's a very difficult and precarious equilibrium
in between helping families
and shielding them from the impact of high prices
and letting the market work and reduce demand
so there is enough gas to make it through the winter.
One of the things that you could do
is protect the most vulnerable families,
the poor, the working class,
but at the moment, most European countries
is just literally protecting everyone.
Europe may not have found the perfect solution
to the supply and demand puzzle, but as winter approaches,
it's finally caught a few breaks.
Many countries have successfully filled up
their emergency stores of natural gas,
bringing gas prices down from their late summer peak,
and forecasts are predicting
relatively mild winter temperatures.
Probably, Europe will be able to make it
through the winter.
The problem is what happened next year into 2023
and the winter of 2023, 2024.
Without any Russian gas next year,
next winter looks absolutely horrendous.
There is not enough gas out there in the LNG market
to replace imports of Russia gas for a full year.
This is a permanent change
in the way that Europe has bought gas,
and that means permanent higher gas and oil prices.
Many are hoping that change can push Europe
in a direction it needs to go anyway
towards more renewable energy.
In light of this year's crisis, a push towards renewables,
electrification, and energy efficiency is more attractive
than it's ever been.
What we are seeing this year is that fossil fuels
are not the way to have a secure energy system.
That actually, clean energy with renewables at its heart
are also going to be more secure.
It's not easy to roll out a secure clean energy system.
Very, very difficult.
Lots and lots of work to do, innovation to happen,
investment to happen, but it can be done.
Renewables are already helping to turn the tide.
A study found that the wind
and solar capacity that was added between March
and September alone saved Europe the equivalent
of $11 billion in avoided gas imports.
We are seeing that authorities,
governments are raising incentives for the construction
of more clean, wind, solar, power plants.
And Europe still is promising
and targeting to be climate neutral in the mid-century.
Whilst fossil fuels have, of course,
powered incredible improvements in living standards,
they've also led to war after war, crisis after crisis.
But in the past, we've had no alternative.
This time, we have line of sight
towards an energy system that is sustainable,
affordable, and secure.
And if there's going to be anything good
coming out of this year,
it is that vision and accelerating towards it.