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Where is the energy crisis heading in Europe? | If I had known | Economy

In recent months, energy, and more specifically its price, has been one of the hottest topics in economic and social activity throughout Europe. In Spain, without going any further, there is not a day that is not talked about. On the street, in the market, in the Congress of Deputies and in the European Commission, the electricity tariff is one of the most worrying issues. There is no week in which a new historical record is not reached. The most recent, 700 euros per megawatt hour (MWh), discourages many households from connecting some appliances even at dawn. Now, the conflict between Ukraine and Russia, the main supplier of gas (and oil, in many countries) to the European Union, threatens to aggravate the situation to unknown limits.

But the problem comes from before. The strong post-pandemic recovery that developed economies have experienced, together with what is known as the energy transition (the European Union set targets of 55% decarbonisation by 2030 and total carbon neutrality by 2050), which has led to little investment in the oil and gas industry, the prices of fossil fuels had already skyrocketed months ago. According to data from the International Energy Agency, the industry’s investment in exploration and production was at its lowest level in the last 15 years in 2020 and 2021.

And as if this were not enough, came the invasion of Ukraine and the still germinal political clash between Russia, the European Union and the United States. A situation that has triggered uncertainty and doubts about the security of the supply of natural gas to Europe. In this way, at the end of February, after the invasion of Ukraine by Russia, the price of crude oil exceeded 100 dollars per barrel. At the same time, Europe saw the price of natural gas increase fivefold, just in the last year. To be aware of the economic implications of these price increases, a fact that is as revealing as it is worrying: together, oil and gas account for nearly 60% of all energy consumption in the Europe of the 27.

Russia’s dependency

Each year the European Union imports approximately 3,660 TWh of natural gas. Of this amount, almost 45% comes directly from Russia. The question weighs heavily: Could the European economies substitute the gas they receive from the Russian giant if, if necessary, this country decides to reduce or even permanently cut off the supply? What impact would this scenario have on European economies?

If you want to know more about all these issues that shape the macroeconomy and affect household accounts and find out about the situation that European economies are facing in terms of energy, don’t miss the latest video from if i had knownthe new financial information channel of Mutuactivos.

He knows in depth all the sides of the coin.

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