Europe's Energy Agency Warns Of Unprecedented Crisis

Europe’s energy agency warns of unprecedented crisis, inflation surges, consumer borrowing soars, mortgage approvals fall

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The current energy crisis could be one of the worst and longest in history and European countries could be hit particularly hard, the head of the International Energy Agency, Fatih Birol, said on Tuesday.

In an interview with German magazine Der Spiegel, Birol said that the fallout from the events in Ukraine is likely to make the current energy crisis worse than the crises of the 1970s.

“Back then it was all about oil. Now we have an oil crisis, a gas crisis and an electricity crisis at the same time,” Birol told the publication, adding that before the ongoing events in Ukraine, Russia was “a cornerstone of the global energy system: the world’s largest oil exporter, the world’s largest gas exporter, a leading supplier of coal.”

As part of its Ukraine-related sanctions, the EU introduced restrictions on Russian fossil fuels and has pledged to gradually phase them out.

Phase them out into what exactly? Experts have repeatedly said that there is no alternative to Russia’s supplies.

Birol warned that countries in Europe that are more dependent on Russian gas are facing a “difficult winter,” as “gas may well have to be rationed,” including in Germany. His comments came as Russia’s state gas supplier Gazprom cut off supplies to some energy firms in Germany, Denmark, the Netherlands and other countries, after their failure to pay for the fuel in rubles as per new requirements.

To try and mitigate the impact, EU states should procure as much additional gas as possible, for example pipeline gas from Norway or Azerbaijan, and LNG. According to Birol, coal-fired power plants could also partly replace gas-fired plants.

‘Partly’, which means that people will have ‘part’ of their usual energy supply. Moreover, as just one example, the UK doesn’t have the facilities to receive or store all of the expensive and unreliable shipments of US LNG.

The upcoming summer may be difficult as well in the EU and the US, due to the tight crude oil markets, Birol said. He warned that when the peak holiday season kicks off, fuel demand will increase, leading to “bottlenecks, for example with diesel, petrol or kerosene, especially in Europe.”

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