Last weekend’s outbreak of the Israel-Gaza war, undermining any attempt at peace in the Middle East and the process of normalizing Israel’s relations with the Arab countries, and, in addition, the suspected sabotage of the Baltic-connector gas pipeline, used by Finland and Estonia for access to an underground gas storage facility in Latvia, are two developments that have come at the worst possible time for European energy security and cost concerns, right before winter and following an EU decision to end energy crisis-related support measures for consumers all over Europe.
The two developments would have impacted energy markets any time of year, but their pre-winter emergence makes them even more critical. This is the time of year when demand for natural gas and oil increases in Europe, along with prices. In Greece, the heating oil trading season is set to begin October 13.
Markets around the continent have not been appeased by the fact that European storage facilities are 95 percent full, but instead, are being driven higher by the unease brought about by the latest events.
Besides the Israel-Gaza war, the Baltic-connector pipeline has just been shut down after a sudden drop in pressure, raising fears of Russian sabotage as retribution for Finland joining Nato in April this year.
The damage to this infrastructure has revived concerns about energy security following the Nord Stream pipeline blasts last year.
According to macroeconomic research consultancy Capital Economics, the combination of events could raise oil prices to levels well above 100 dollars a barrel for some time.
Wholesale natural gas prices rose 12.3 percent in a day, to just under 50 euros per MWh at the Dutch TTF hub.
The Greek government may need to reconsider its decision to end energy subsidies for all consumers. Supply companies may need to hedge prices and factor in the new risk factors. Also, refineries and gas importers may need to secure loads before prices escalate.
With Israel preparing for a ground attack on Gaza, it has become clear that decisions such as the choice of route for Israeli gas exports to Europe; promotion of Israel’s energy cooperation with Greece and Cyprus; and the development of projects such as the Israel-Cyprus-Greece electricity grid interconnection, are, for the time being, not a top priority.