Europe’s energy crisis will be a persistent economic headwind – The Peninsula

Europe’s energy crisis will be a persistent economic headwind – The Peninsula

Doha: Europe’s dependence on Russian gas has been increasing for the past few decades despite massive investment in renewable energy. Indeed, the proportion of Europe’s gas coming from Russia rose from 26 percent in 2001 to 37 percent in 2019. Now, with the war in Ukraine, Russia is using this dependency to try and undermine Europe’s support for Ukraine and push for an easing of sanctions.

The dependence on Russian gas has means that prices have risen to record highs across the whole continent. Indeed, the Title Transfer Facility (TTF) benchmark gas price in Europe has risen to almost 8 times its average since 2010. However, the pain is not being felt equally across the continent, with the countries in Northern, Central and Eastern Europe typically most dependent on Russian gas.

Gas plays an important role in the European economy for heating homes, for heavy industry and as the marginal fuel in electricity production. Hence, these record high prices are already acting as a headwind for the European economy. But, with no end in sight for the war in Ukraine, financial markets have moved to price in persistently high gas prices into 2023 and 2024. This week, QNB considers the implications of