Europe’s energy crisis now threatens to accelerate the de-industrialization of the continent as many companies face a constant struggle with high energy costs.
Russia’s war on Ukraine and its subsequent decision to cut its energy supplies to Europe have jeopardized the region’s energy security situation and pushed up fuel costs for commercial entities. European companies are now paying almost five times the price for natural gas compared to the US.
For decades, European companies have moved production elsewhere because of labor costs. The recent surge in energy prices is likely to accelerate this trend.
“If energy prices remain high and some European industries become structurally uncompetitive, factories will close and the United States, where cheap shale energy is abundant, will continue to grow,” said Daniel Krall, senior economist at Oxford Economics. will move to,” he said. Reuters.
Germany’s Kelheim Fibers, which supplies Procter & Gamble, has already cut production twice at its factory in Bavaria.
Norwegian fertilizer maker Yara has cut its European ammonia production by two-thirds. Swedish steelmaker SSAB plans to cut production capacity in the fourth quarter.
More than half of Europe’s ammonia production has already stopped, according to the International Fertilizer Association. Europe became a net importer of chemicals for the first time this year. In October, eurozone manufacturing activity hit its lowest level since May 2020.
“A mild winter alone will not save the day in Europe. Growth is slowing, the European Central Bank is tightening and the single currency remains weak.” Said to Reuters.
Last month, the International Energy Agency (IEA) warned that Russia’s political motives could lead to gas shortages in Europe that could be rationed this winter. Gas deliveries from Russia to the European Union (EU) fell by almost 40% in the first half of the year.
If energy costs remain high, governments may also face social unrest as people seek cheaper solutions. In several EU member states, we are already seeing citizens taking to the streets to protest against the rising cost of living.
inside interview Agata Łoskot-Strachota, senior fellow at the Eastern Research Center in Poland, warned in Euro News that the energy crisis situation could last for years.
While the worst-case scenario may not play out this winter, things could get worse as countries begin to draw gas from their reserve storage tanks and rush to fill them.
“I am convinced that this is a crisis that could last for at least three years, and next year we will completely deplete gas storage, completely deplete coal reserves, as in Poland, and completely deplete fiscal reserves. It will be very difficult because there is a very high chance that the country, household by household, is shrinking,” she said.