Analysis | Europe’s Energy Crisis Will Cost You $200 Billion — Probably More – The Washington Post

by | Jul 18, 2022 | Energy

Comment on this storyCommentGift ArticleElements, Bloomberg’s daily energy and commodities newsletter, is coming soon. Sign up here.It’s a falling chain of energy dominoes — one in which each tile is worth many billions of euros. A failed utility here, a nation’s supply there. When the dust settles, the total bill for rescuing the European energy market this winter will easily top $200 billion.This may sound flippant, and it’s admittedly a rough estimate. But the calculus is conservative and based on what we know today. It doesn’t cover the worst-case scenario of both Russia fully shutting down natural gas supply to Europe and a colder-than-average winter.Very few politicians seem to grasp with the magnitude of the coming crisis and its costs, with Emmanuel Macron of France and Olaf Scholz of Germany being among the only ones that appear to get it now. (The rest, in many cases, remain distracted by domestic politics.) The European Union has called for an emergency meeting of energy ministers later this month. But this should precede a larger heads-of-government summit focused on energy before the summer break.AdvertisementThe EU will have to decide on a big energy savings program, including a public campaign to support it, and make clear that nations will help each other by sharing the little gas that will be available. This means inviting the UK, Switzerland and Norway to the table in Brussels too. As forward natural gas and electricity prices continue to climb, more European utilities and energy retailers will struggle. Consider Germany, where the one-year forward electricity contract surged last week to an all-time high of more than 350 euros ($352) per megawatt hour, up 750% from an average of 41 euros between 2010 and 2020. Natural gas prices for 2023 in Europe have surged recently, too.The only chance of survival for the utilities is to pass the huge jump in wholesale prices onto their customers. But that only moves the bailout down the chain, as households and businesses would then face unaffordable bills and need government help.AdvertisementUltimately, taxpayers will bear the cost — either directly and immediately, via higher retail power and gas prices, or later, and over the years, via higher taxes to pay for the bailouts. European governments should be upfront about the costs: They can win the argument that this is money well spent to stop Vladimir Putin. Let’s start from the utility side. Germany’s Uniper SE, the biggest buyer of Russian gas, has all but failed. It recently asked for a government bailout, and preliminary estimates put the bill at 10 billion euros. That’s likely …

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