Europe Set Itself Up for This Energy Crisis

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Bros says the situation we face is not a market failure, but a regulatory one. Bros participated in the liberalization of the French market and its integration into the European internal energy market. The process of liberalization should be carried out and then given control to a completely independent regulatory body. Currently, countries are left to their own devices, able to make a mix of different decisions about their own energy integrity, as long as they fall roughly within European guidelines. “If you start playing around with that concept, you end up where we are,” he says.

Some countries preferred cheap gas to diversified ones: EU energy directives say that each country should have at least three different sources of gas supply, with the idea that countries should try to divide their supply as evenly as possible, but some countries, including Germany, are confident. to Russia as its main supplier because of its cheap energy. Bros believes that this decision was made knowing that if things went wrong, the other European countries would pick up the slack. “It’s not liberalization if it’s a concept where everyone can do what they want,” says Bros. “If we had been following all the rules, we should have been stronger.”

There is also the problem that what should be a united front is often not so harmonious. Nord Stream 2, an expansion of the original Nord Stream pipeline that carried gas from Russia to continental Europe — landing in Germany — was backed by Germany and Austria. But it was opposed by other European countries, such as Poland, Ukraine and the Baltic states. In the end, the plans were shelved, but only after Russia launched its invasion of Ukraine.

Of course, one of the problems seemed inevitable: He didn’t factor in any disruption outside of Europe. “It covers everything that’s internal,” says Gladkykh. “It doesn’t cover all the external factors that are sometimes unpredictable.” This includes Russia’s illegal invasion of a sovereign country, Ukraine, and the resulting backlash and economic sanctions that the war brings. “Germany in particular was pushing this idea that trade will encourage change in Russia],” he says. “How naive that is from today’s perspective.”

Part of the problem with the European internal energy market guaranteeing security of supply is that it predicted a faster shift to renewables than has actually happened. “There was chronic underinvestment and capacity share was too slow,” he says.

Gladkykh, who worked for the Ukrainian government when Russia cut gas supplies to Ukraine in 2014, is not sure whether any market structure would have insulated Europe from the external shocks that have created the past six months. But the market structure we have means that countries already facing their own critical supply shortages are forced to pass gas through in order to travel further down the supply chain, even if they themselves desperately need it. It’s a blessing at the group level—no country is completely cut off from energy—but a curse at the nation-state level, because countries are expected to give a little to ensure that everyone has it, even if they don’t be enough Thousands of gas pipelines cross Europe, connecting their countries and diverting the gas as it reaches the continent. “When you have an interconnected internal market, the more links there are, the better the security of supply because other countries can help each other,” says Imsirovic.

It is unclear whether this charitable approach will survive the difficult winter ahead. Germany’s situation is an example of “bad decision-making, basically,” Gladkykh says, but they’re not alone. Cold weather is coming to all European countries, and the idea that countries are all in this together can be dispelled when the going gets tough. “I think this crisis will stop the process of liberalization and integration, and we will return to each state looking at its own security of supply and energy markets,” he says. “I think this is the end of the theory of a unified gas market in Europe. Vladimir Putin is playing exactly this game.”

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