Not only did the long-month European gas crisis show no signs of abating, but the declining rhine water level caused transport disruptions under the drought that swept across Europe, and the European energy crisis intensified, further pushing up energy prices.
Ice UK gas futures rose about 7.38% in late European trading on Monday (Aug. 15), refreshing daily highs to 425.000 pence/kcal. TTF benchmark Dutch gas futures rose 8.03 percent, refreshing daily highs of 222.000 EUR/MWh. As of Friday, natural gas had risen for the fourth straight week, about 10 times higher than the seasonal average of the past five years.
As gas prices rise, European electricity prices also jump to new records, with Germany rising as much as 3.7 percent next year to 477.50 euros per megawatt-hour, almost six times the same period last year, and doubling prices in the last two months alone.
The worst drought in 500 years has swept across Europe, and Europe's inland waterway shipping has been severely affected
Andrea, a researcher at the European Commission's Joint Research Centre, warned that this year's drought was more extreme than in 2018 and perhaps the worst in Europe in 500 years. And such extreme heat and drought may be destroying Europe's economic lifeblood.
Stretching for more than 1,300 kilometers, the Rhine Originates in the mountains of the Swiss Alps, flows through Germany's most important industrial areas, and flows into the North Sea near Rotterdam, the Netherlands, the largest seaport in Europe, and is the economic lifeblood of the entire European continent.
Germany relies on the Rhine for 80% of its water transport, which transports coal, iron ore, oil, building materials and other raw materials all year round, of which the oil trade reaches 400,000 barrels per day. Chemical giant BASF and steelmaker ThyssenKrupp rely on this waterway to transport raw materials.
However, as the Wall Street Chronicles earlier article stated, the Rhine water level in Kaub, Germany, had fallen to a critical water level of 40 centimeters (15.7 inches) on Friday, and the low water level limited the number of goods that barges could carry, thus limiting the supply of goods and the export of goods along the coast.
Germany's Federal Water and Shipping Authority had previously expected the water level to continue to fall, reaching 33 centimeters on the Kaub section of the middle Rhine river by August 15. In fact, the latest German government data show that the water level on the Rhine fell to an extremely low level of 30 centimeters on Monday, and the water level is expected to fluctuate above this week. The reading is just 6 centimetres (2.4 inches) from its all-time low of 25 centimetres (9.9 inches) in 2018, when low water levels closed waterways and further contributed to a recession in the EU's largest economies.
Deutsche Bank said the loss of the Rhine in 2018 caused Germany a loss of 0.2 percentage points of GDP that year. This year's lows appeared early, and if they continue longer, the damage to the German economy will be even worse.
In addition, although Russia resumed supplying natural gas to Europe through the Nord Stream pipeline three weeks ago, according to a previous decision by the Russian state-owned enterprise Gazprom, it will reduce the amount of gas transported through the Nord Stream pipeline from 40% to 20%, citing problems with a turbine.
German energy experts point out that consumers must be prepared for a "price explosion", and the price of natural gas is expected to rise by 1 to 3 times this winter.
High temperatures swept in, electricity consumption surged, and hydroelectric power generation was severely affected
In addition to the disruption of transport exacerbating the European energy crisis, the demand for electricity in Europe has surged under extremely rare high temperatures. But high temperatures have led to increased evaporation in rivers, lakes and reservoirs, with hydropower generation in Europe severely affected, from the dry and cracked reservoirs in Spain to the falling water levels of major rivers such as the Danube, Rhine and Po rivers.
Hydropower is one of the most important sources of electricity in Europe. In Italy, for example, hydropower accounts for 20 percent of the country's total electricity production, but the country's hydropower production has plummeted by 40 percent over the past 12 months, and Spain's hydropower production has plummeted by 44 percent.
At the same time, new energy power such as Taineng energy has not "shared the worries" of the European energy crisis because the photovoltaic power generation panels cannot withstand the power loss and shortened service life of the electric panels caused by high temperatures.
To add to the egregious problem, the heat wave also put more pressure on Europe's energy infrastructure, forcing the closure of several nuclear power plants in France and halting the natural gas pipeline connecting the United Kingdom and Belgium because the temperature was too high. Norwegian gas operator Grassco AS also announced that due to overheating, gas pipelines to the UK must be reduced.
Rising energy prices are seeping into household bills and every aspect of society. In the case of the UK, according to the latest analysis by the UK government, in its preset "reasonable worst-case scenario" option, the UK may face a power gap of about one-sixth of peak demand this winter, even after the start of emergency coal-fired power plants. The UK is expected to have four days in January next year, with emergency measures to be activated to conserve gas, and factories and even homes may have to carry out "organised" power outages.
By the default, by January next year, UK households could face an average annualised electricity bill of more than £4,200, while the average annualised electricity bill for UK households is currently less than £2,000.
The land has dried up, wildfires have been rife, and Europe is facing a food crisis
According to the latest data released by the European Commission's Joint Research Centre, the continent is experiencing an unprecedented state of drought, the worst drought in the region in nearly 500 years, with nearly 47% of the continent covered by "severe drought". In mid-July, only 15 percent of Europe was classified as a "severely arid" region.
Affected by this, wildfires in Europe this summer are frequent. According to the European Forest Fire Information System, more than 50,000 hectares of forest in France have been destroyed by fire this year, which is more than three times the average in the past decade. According to statistics, since June 10, the area of fires in France has reached 41,400 hectares, much higher than 2,040 hectares in the same period last year.
According to a report by the Portuguese Ministry of Emergency And Civil Protection on August 12, local time, as of that day, mountain forest fires in central Portugal were still active. The fire, which began on August 6, has burned more than 14,000 hectares of land.
According to the Italian Agricultural and Pastoral Association, wildfires triggered by drought have cost Italy an average of 10,000 euros per hectare, and reconstruction can take up to 15 years.
In 2018, extreme heat and drought reduced major crop yields in Central and Northern Europe by 50 percent, but wet weather in southern Europe sent harvests soaring, buffering the impact across Europe. The difference is that this year the entire Continent has been hit by heat waves and droughts that threaten food security, energy production, drinking water reserves and wildlife survival.
Specifically, Italy expects drought to reduce its wheat production by 15% in the world's largest wheat-producing and export regions, with France and Germany being the main wheat producers. Affected by extreme heat, the media previously expected eu wheat production to be reduced by 4.7 million tons in 2022 due to bad weather.
Europe is already facing intractable economic woes even before this summer's heat, with the highest inflation in history, energy shortages caused by the Russian-Ukrainian conflict, and limited monetary policy space. A series of crises brought about by the heat have made Europe's economic situation worse.
European governments are studying how to alleviate the pain and solutions to the economy caused by soaring energy costs. In France, where the state plans to fully nationalize Electricite de France SA, the troubled nuclear power company is now struggling to keep its plants running in the sweltering heat.
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