Brussels: After Russia announced that one of its major gas supply pipelines to Europe will remain closed indefinitely, European gas prices skyrocketed by as much as 30% on Monday, reigniting concerns about shortages and gas rationing in the European Union this winter.
When the market opened, the benchmark gas price spiked to 272 euros per megawatt-hour (MWh) after Russia announced on Friday that a leak in the Nord Stream 1 pipeline equipment would cause it to remain closed longer than the three days of scheduled maintenance last week.
The Dutch TTF October gas contract had eased to 256 euros, up 23% on the day by 0723 GMT but almost 400% higher than a year ago. The price increase this year has put pressure on already-struggling households and caused several sectors to suspend output.
In retaliation for Western sanctions on Moscow over its invasion of Ukraine, Europe has accused Russia of turning energy supplies into weapons. According to Russia, sanctions have impeded pipeline operations, and the West has started an economic war.
Historically, the Nord Stream pipeline, which crosses the Baltic Sea to reach Germany, provided almost a third of the gas Russia shipped to Europe, but it was only operating at 20% of capacity last week when flows were stopped for repair.
The amount of Russian gas delivered through Ukraine, another important route, has also decreased, forcing the EU to scramble to find substitute supplies to fill gas storage facilities for the upcoming winter. A number of states have emergency plans that might cause energy rationing and increase the likelihood of a recession. –Agencies