Europe's energy crisis this year poses a threat to economic recovery, with natural gas and electricity prices both hitting record highs.
Prices soared more than 20% on Tuesday after Russia restricted natural gas shipments to Europe, forcing France, usually a power exporter, to import more electricity and burn oil to maintain power. Rising prices have also forced some companies to close or limit production, while eurozone inflation surged to an all-time high last month.
The energy crunch comes as omicron mutants spread across Europe, worsening the region's economic outlook. Rising prices have also exacerbated supply chain congestion, dealing a heavy blow to industries such as automobiles and wind turbines. Food producers were also affected, with costs in the energy-intensive fertiliser industry soaring.
"it's not just about energy costs, it's about the supply chain," said Anne-Sophie Corbeau, a researcher at Columbia University's Center for Global Energy Policy. "Food and heating are very important. Now, many people may face heating problems, but food problems may also occur because fruits and vegetables are expensive. Everything is very expensive. "
At one point, European gas futures surged 28 per cent after pipeline operator Gascade said Russian gas shipments to Germany through an important pipeline had fallen to zero and diverted eastward to Poland. The situation is likely to continue on Wednesday.
German electricity prices delivered next year rose as much as 25 per cent, while French power contract prices soared 26 per cent due to nuclear power outages, and France was forced to start six oil-fired generating units on Tuesday morning, according to an Entsoe announcement. The thinness of trading during the holiday season is also one of the reasons for the rise in prices.
"such a turbulent period may continue for some time, and it may not end until the end of winter," said Hans van Cleef, senior energy economist at ABN AMRO. "depending on the inventory situation at that time, the impact of this round of shortages on prices is likely to be much longer."