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EU names two risk scenarios on Russian gas supplies

Oil&Gas Materials 23 November 2022 14:04 (UTC +04:00)
EU names two risk scenarios on Russian gas supplies
Laman Zeynalova
Laman Zeynalova
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BAKU, Azerbaijan, Nov.23. Considerable uncertainty in European energy markets still surrounds the economic outlook, Trend reports Nov.23 with reference to the European Commission.

“Despite the realization of major downside risks since the Spring Forecast, important risk factors remain. Further supply cuts from Russia and insufficient reductions in gas consumption are important downside risks,” reads the report released by the European Commission.

The analysis considers two main risk factors: (i) a full stop of remaining pipeline gas imports from Russia (from around 7% of total EU gas imports in October compared to 40% before 2022) in mid-December and (ii) cold winters in the next two years, which ceteris paribus raise gas demand by around 12% between December and March, compared to the implicit baseline assumption, roughly in line with the maximum consumption observed in 2014-2021. It is important to note that the modelling of these hypothetical events does not necessarily imply that the probability of such events happening is high. The choice of scenarios rather aims to illustrate the potential economic consequences of important downside risks. Finally, the scenarios do not include economic policy responses to the shocks beyond the workings of automatic fiscal stabilisers and the estimated monetary policy response.

“Should these risks materialise, the EU would face severe gas shortages. The shortfall in gas imports and higher-than-anticipated demand would accelerate storage depletion during winter 2022/2023. Still, high gas storage levels of more than 90% in October and reduced gas consumption should provide sufficient buffers until early 2023. However, gas storage would not be sufficiently refilled ahead of winter 2023/2024. This missing buffer stock would lead to a major gas shortage in that winter unless the shortfall in imports from Russia is substituted with other sources and the increase in gas consumption is restrained,” reads the report.

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