Europe could face energy shortages says IEA

Europe could face energy shortages next winter after Russia’s invasion of Ukraine has deepened the region’s energy crisis, the head of the International Energy Agency (IEA), Fatih Birol, has warned.

“I am especially worried about the natural gas markets … if we have a harsh and long winter we may see very difficult days [ahead],” said Birol at IEA’s annual conference on energy efficiency in Sonderborg, Denmark.

Birol said that while governments and companies were now looking to secure alternative energy supplies, it is equally important for governments to take measures to reduce demand.

If European consumers reduce the temperature in their homes by 2 degrees Celsius, 20 billion cubic meters of natural gas will be saved, equivalent to the volumes coming from Russia to Europe through Nord Stream 1, he said.

His warnings follow the gloomy recent assessment by trade credit specialist Atradius that the ongoing war in Ukraine is having an ever-increasing impact on the global economy and supply chains.

Atradius found the global economy remains challenged by supply chain issues and high energy prices, with the Russia-Ukraine conflict further increasing commodity prices and inflation.

Atradius warned that global recovery from the impact of the pandemic has been thwarted by the Russia-Ukraine conflict, which is having a negative impact on global growth. Predictions from Atradius have been downwardly revised by 0.7% in 2022 and 0.4% in 2023. Despite this revision, Atradius is forecasting relatively robust global growth over the next two years at 3.4% in 2022 and 3.2% in 2023. This growth forecast is, however, subject to a high level of uncertainty.

Unsurprisingly, prices of a wide range of commodities are set to increase significantly in 2022, partly as a result of the Russia-Ukraine conflict. Oil and gas prices are already showing renewed volatility, but Atradius also forecasts prices of commodities produced in Russia and Ukraine to increase significantly. These include wheat, barley, vegetable oils and base metals.