European governments measure billions of dollars in aid to fend off soaring natural gas prices

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Newsletter: Euro Express

The soaring cost of natural gas and electricity has forced European governments to discuss the provision of billions of euros in assistance to households and disaster-stricken suppliers because people are increasingly worried about the deepening of the winter energy crisis.

The EU energy ministers will meet this week to discuss countries’ reactions to soaring natural gas wholesale prices, fearing that this will jeopardize the economic recovery after the European pandemic and undermine Brussels’ ambitious but costly green reform plan.

Italy is expected to launch a multi-billion euro family support program this week.A source with direct knowledge of the Italian Ministry of Finance said, “The amount to solve this problem seems reasonable. [of soaring energy costs] Up to 4.5 billion euros”.

Rome has spent 1 billion euros directly intervening in the energy market to reduce consumer prices. More than two-thirds of Italy’s energy needs come from imports.

Italy’s plan was formulated after Spain’s decision last week to raid energy companies’ excess profits and provide consumers with tax breaks. The company is expected to pose a legal challenge to this move to depress the stock price.

France has announced a subsidy of 100 euros for nearly 6 million low-income families. The British government is also considering providing state-backed emergency loans to energy companies to take over unprofitable customers from failed small suppliers, and has admitted that several companies may go bankrupt within a few days.

Norwegian state-owned oil giant Equinor said on Monday that it will increase the supply of natural gas to Europe by increasing the production of two North Sea oil fields starting from Friday. Equinor said it is looking for ways to further promote exports.

“We think this is very timely because Europe is facing an extremely tight natural gas market,” said Helge Haugane, Equinor’s head of natural gas and electricity. Norway is the EU’s largest natural gas supplier after Russia.

The reason for the surge in natural gas wholesale prices was the decline in storage capacity during the long winter in Europe last year, and the reduction of Russian natural gas exports to Northwest Europe this year before the politically disputed North Stream was launched 2 pipelines.

Gazprom, a Russian state-backed monopoly natural gas exporter, has fulfilled all long-term contracts with customers, but did not provide additional supplementary sales through Ukraine this year, while allowing its storage facilities in Europe to drop to a low level.

Gazprom CEO Alexei Miller said on Friday that although Europe may face long-term record prices this winter, “the Asian market is more attractive to producers and investors.”

Other energy companies have warned that there is no quick solution to the supply shortage in Europe. Claudio Descalzi, chief executive of Italy’s Eni Group (one of the world’s largest oil and gas companies), said on Monday that although governments are correct in trying to accelerate the adoption of renewable energy, They chose to solve the supply of fossil fuels before demand, causing market tensions.

“This is not time-limited, but structural,” Descalzi told the Financial Times when discussing the surge in natural gas prices. “You can’t reduce supply without reducing demand,” he said, warning that increasing pressure from governments, activists and investors makes it difficult for energy companies to invest in natural gas supplies.

Price tightening has made critics of the EU plan to reduce greenhouse gas emissions by increasing the cost of carbon dioxide for gasoline and heating in the coming decades even more boldly. Brussels urges EU countries not to undermine their proposal to increase carbon taxes, saying it is essential to push companies from fossil fuels to more sustainable energy sources.

“The current situation makes the rationale for the green transaction policy even stronger. We need more, not less, and faster changes,” EU Energy Commissioner Kadri Simson told the Financial Times. “The only real long-term solution here is to increase the share of renewable energy, which is usually already the cheapest energy on the market.”

In Germany, Europe’s largest economy, the price comparison website Verivox 32 stated that regional natural gas suppliers have announced an average price increase of 12.6% for September and October. This will result in an increase in heating costs for single-family houses of 188 Euros per year.

France’s heavy reliance on nuclear energy and price regulation means that the country is not as susceptible to price increases as the rest of Europe. But industry and consumer groups have begun to sound the alarm about the imminent impact this winter.

Consumer organization UFC-Que Choisir estimates that by 2022, the electricity bills of ordinary households may increase by 10%—an increase of 150 euros per year.

With the advent of the 2022 general election, the French government is cautious about consumers’ anger at rising prices.It wants to prevent a repeat of 2018 Yellow vest The proposed petrol tax increase sparked protests.

Additional reporting by Richard Milne from Oslo, Anna Gross from Paris and Guy Chazan from Berlin

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