The latest data show that the annual EU energy inflation rate reached 41.1% in June, up 14.1 percentage points from the beginning of the year. Natural gas rose the most, with an average inflation rate of 51.4%, an increase of 10.7 percentage points from the beginning of the year. Energy inflation hit its highest level in June since the Harmonized Consumer Price Index (HICP) was first published in 1997, according to Eurostat.
Amrita Sen, head of research and co-founder of London-based consultancy Energy Aspects Ltd., said Wednesday that the surge in energy prices means “we’re going to see a sharp contraction in the European economy .” While many industries were restricting gas and switching to alternatives where possible, the burden of high prices was “huge”, she said.
Germany, Europe’s largest economy, has become one of the countries hardest hit by the energy crisis due to its traditional heavy reliance on Russian supplies. The German government has urged lower consumption, warned of a rationing system and this week imposed a tax on natural gas use. It is also eager to build floating terminals to import LNG.
In June, German crude oil imports from Russia fell to 1.81 million tonnes, the lowest level since June 2019, from 2 million tonnes the previous month, agency data showed. Russian lawmakers say Germany could start the Nord Stream 2 pipeline by 2023 due to rising living costs .
German energy regulator Klaus Mueller, head of the Federal Network Agency, said recently that once supplies from Russia stop completely, even if Germany fills underground natural gas storage facilities to 95% of its total capacity by November, Germany’s natural gas reserves will be reduced. Only enough for heating and industrial facilities to run for about two to two and a half months. Mueller pointed out that Germany is currently accelerating the accumulation of natural gas in preparation for winter, and by October, gas storage should be filled to 85%.
This week, electricity prices in Germany, the European benchmark, for the year ahead rose above the 500-euro/MWh mark, while French and Nordic electricity contracts both hit record highs. Economists bluntly say the euro zone is now more likely to slip into recession.