European gas prices rocketed as much as 30% higher on Monday after Russia said one of its main gas supply pipelines to Europe would stay shut indefinitely, stoking renewed fears about shortages and gas rationing in the European Union this winter.
The benchmark gas price surged as high as 272 euros per megawatt-hour (MWh) when the market opened after Russia said on Friday that a leak in Nord Stream 1 pipeline equipment meant it would stay shut beyond last week’s three-day maintenance halt.
The Dutch TTF October gas contract had eased to 256 euros, up 23% on the day by 0723 GMT but almost 400% higher than a year ago. This year’s price surge has squeezed struggling already consumers and forced some industries to halt production.
Europe has accused Russia of weaponising energy supplies in retaliation for Western sanctions imposed on Moscow over its invasion of Ukraine. Russia says the West has launched an economic war, and sanctions have hampered pipeline operations
The Nord Stream pipeline, which runs under the Baltic Sea to Germany, historically supplied about a third of the gas Russia exported to Europe, but it was already running at just 20% of capacity before flows were halted last week for maintenance.
Russian gas being supplied via Ukraine, another major route, has also been reduced, leaving the EU racing to find alternative supplies to refill gas storage facilities for winter. Several states have triggered emergency plans that could lead to energy rationing and raise prospects for a recession.
“Supply is hard to come by, and it becomes harder and harder to replace every bit of gas that doesn’t come from Russia,” said Jacob Mandel, senior associate for commodities at Aurora Energy Research.
Sky-high power costs have already forced some energy-hungry industries, including fertiliser and aluminium makers, to scale back production, and led EU governments to pump billions of euros into schemes to help households.
Read also; Russia Defaults on Foreign-Currency Sovereign Debt for the 1st Time Since 1918.
