European Economies Bracing As Russia Cuts Natural Gas Supply And Prices Surge

As the U.S. continues to pour money into Ukraine, natural gas prices across Europe have skyrocketed to 10 times their average price for this time of year. With summer ending soon, economies across the continent are becoming more destabilized and the euro is being undermined in international markets.

The price surges are largely attributable to reductions in the supply of natural gas coming from Russia through the Nord Stream 1 pipeline. It is believed that the throttled supplies are in retaliation for sanctions imposed by the U.S., U.K., and European Union nations in response to the Russian invasion of Ukraine in February.

Lowered gas shipments from Norway are also expected through next month due to supply system maintenance. Supplies from the U.S. have also been disrupted because of damage to an American production plant from an explosion earlier this year.

Disruptions in supply from Norway and the U.S. have created additional pressure on European consumers, as both nations have been making up much of the supply lost due to the disruption in shipments from Russia.

Virtually all industries in Europe have been affected severely by the increased cost of gas, particularly aluminum and fertilizer production.

In addition to overall decreases in the amount of gas being shipped through Nord Stream 1, Russian energy giant Gazprom PJSC has announced that it is stopping the flow of gas through the pipeline completely for at least three days starting next Wednesday.

Gazprom has said that the interruption is necessary for routine maintenance. There have been concerns raised across Europe that Russia may not restart the flow of gas after the stoppage.

Goldman Sachs Group head of natural gas research Samantha Dart told reporters this week that Europe “simply doesn’t have access to enough alternative supplies to easily compensate for those Russian gas losses.”

Berenberg Bank economist Salomon Fiedler said that the staggering increase in natural gas prices has already affected European production to the point the continent’s nations are entering a recession. He also said that with an expected continuation of price surges, especially in the wholesale market, inflation will remain a significant problem for at least the rest of this year.