Mostly outside of America’s public view, Europe’s energy situation continues to worsen. Only a few weeks ago, Russia’s state gas producer Gazprom reduced gas flow to Europe through the Nord Stream 1 pipeline, causing energy prices to skyrocket amid fears of shortages. Additionally, Gazprom cut off three European Union countries and several energy companies for refusing to pay in rubles rather than euros or dollars.
Russia’s actions sent Europe scrambling for new sources of natural gas. European demand for U.S. liquified natural gas (LNG) shipments has soared in recent months. However, a fire at a Texas LNG export terminal led to a sharp decrease in production that some fear could stretch into July.
Norway, Europe’s second-largest energy producer after Russia, is also experiencing supply issues. Norwegian oil and gas workers went on strike over a pay dispute, closing three oil fields in the North Sea. Closing those oil fields resulted in a loss of about 89,000 barrels of oil a day, according to Norway’s state-owned energy company Equinor.
News of the strike pushed European natural gas futures prices up 5% to 172 euros ($177) per megawatt-hour. In response, the Norwegian government has intervened, proposing compulsory wage arbitration to settle the dispute.
“The Ministry of Foreign Affairs emphasizes that Russia’s offensive war against Ukraine has had a major impact on the security of supply in many European countries,” the Norwegian government said in a statement.
“There is an immediate risk of additional energy shortages in Europe. A reduction in Norwegian gas deliveries will worsen the energy crisis, in addition to the inherent political, financial and societal consequences,” the statement added. “Norway must do everything in its power to bolster European energy security and European solidarity against Russian aggression.”
If Norway’s gas production sees a sustained drop in output, the results could be catastrophic for Europe this winter. Germany, the region’s biggest economy, has already declared a “gas crisis” and warned it couldn’t rule out rationing to get through the winter. Gas storage facilities throughout the EU are about three percentage points below where they should be this time of year.
What can the U.S. learn from Europe’s energy crunch? Being overly reliant on imported energy can be a disaster when something goes wrong. That means we must develop our energy sources to keep the lights on here in the U.S., as well as provide supplies to our allies overseas. Otherwise, it could be a long cold winter around the globe not just this year, but for years to come.