Winter’s coming…
Current Geopolitical events, as well as the shutdown of Nord Stream 1, have especially affected Europe, which is facing a massive deficit in Natural Gas. Since it is collected and stored over summer in order to be used in the wintertime, the lack of a major supplier causes a major problem for the upcoming season.
Though the weather conditions of the next few months will be a defining factor in the severity of the crisis, a potential cold spike mid-season could create market panic if the remaining supply of natural gas is not enough to satisfy the demand.
This could translate to energy bills taking a massive hike, which is not ideal, especially since Inflation has already been on the rise as of late.
One direct solution to the problem would be limiting the industrial use of natural gas, which could, in turn, create new problems, such as a deficiency in power, unemployment, and lower economic activity, all key factors to a potential recession.
Though certain countries like Germany have already stayed ahead of the problem, by increasing their storage levels above their target, it remains to be seen how the rest will face this issue. Government intervention in the form of reverse auctions (buying back natural gas from industrial users and adding it to the storage supply) may be a critical factor in solving this conundrum.
