Today, Explained - Europe’s looming energy crisis

Episode Date: September 28, 2022

Pipelines are leaking, winter is coming, and concerns over an energy crisis in Europe are growing. Vox’s Jen Kirby heads to Oktoberfest to find out more. This episode was produced by Victoria Chamberlin, edited by Matt Collette, fact-checked by Laura Bullard, engineered by Paul Robert Mounsey, and hosted by Sean Rameswaram. Transcript at vox.com/todayexplained Support Today, Explained by making a financial contribution to Vox! bit.ly/givepodcasts. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Today Explained, Sean Ramos from here with Jen Kirby, who reports on the world for Vox. And Jen, you are out in the world. You are in Germany in September, though I hear you just went to Oktoberfest? Yes, I just went to the first Oktoberfest since the pandemic. So it was very crowded, but it is in fact cold in Munich and people were really upset about it. So unfortunately with the energy crisis, no heat lamps this year. Therefore, you see in the beer garden, there is not a single person. Does the looming energy crisis already feel real at Oktoberfest 2022?

An abandoned beer garden? No heat lamps? It does, actually. It's one of the cutbacks. But as enough beer goes in her tummy, I think she will warm up automatically. The looming energy crisis in Europe, ahead on today's play. The all-new FanDuel Sportsbook and Casino

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Today Explained. On Monday, the Danish government discovered leaks in the Nord Stream 1 and Nord Stream 2 pipelines. If you're not familiar, these are critical natural gas highways that run under the Baltic Sea from Russia to Germany. This morning, a diplomat over at the European Union said it was a deliberate act. The leaks do raise concern about the possible sabotage as Europe faces a growing energy crisis. Ukraine says it was Russia.

Russia says it was the United States. Either way, it's making a bad energy situation in Europe worse. After experiencing record-breaking heat, parts of Europe are going dark. It's just the latest fallout from the continent's ongoing energy crisis driven by the war in Ukraine. People are being urged to cut their energy use by showering less and turning off the lights.

We're trying to figure out exactly whether or not this is going to be a short-term blip, whether we can manage it over the next few weeks and then we're going to stabilize, or whether this is something we're going to have to live with throughout most of this winter here in Europe. We wanted to find out how Europeans are feeling about this looming energy crisis. So we reached out to Vox's Jen Kirby, who's in Germany. She went to Oktoberfest, where she was sure to find a lot of people to talk to. A lot of people with no heat lamps. The heat lamps are just one sign that Europe is facing a looming energy crisis as winter approaches. The energy crisis is kind of, in many ways, a long brewing thing driven by a lot of different factors. the return to the world after COVID, supply chain snarls.

But of course, with the war in Ukraine, things got really serious as the United States and Europe in particular sanctioned certain types of Russian energy like oil, which also increased the prices. And now Putin has basically turned off the taps. Germany's Chancellor Scholz insists his country can make it through the winter without Russian gas, but Europe will need to reorganize its energy supplies. When the war started, there was a lot of talk about the energy implications for Europe. Remind us what happened at the outset. Putin had started to reduce the amount of natural gas he was sending to Europe last year, even before he invaded Ukraine.

Critics say Gazprom, which has close ties to the Kremlin, is keeping delivery volumes low in order to put pressure on the EU. That was a cause for alarm, but it didn't necessarily get Europe or European countries that are relying on Russian natural gas to totally change their ways. But then in February, Putin invaded Ukraine. The price of oil surged over $100 a barrel in the hours after Russia launched the attack. Gas prices across Europe soared by more than 30%. Things started to get really serious, both as energy prices increased and

Western sanctions on Russia made it potentially more likely that Putin would retaliate. In July, Nord Stream 1, which is a major pipeline that goes from Russia to Germany, Putin claimed that turbines had to go through maintenance. And so he basically slowed that pipeline to a trickle and essentially never really turned the taps back on. And even though European countries were prepared for this scenario to some degree, it's still hitting the continent hard. How much natural gas was Europe getting from Russia before Putin turned off the taps? Europe is getting about 40 percent of its natural gas from Russia.

Forty percent. And it's now down to nine percent. So it's a big drop. And how critical was that 40 percent. electricity for regular households. So it's vitally important. And what Europe has sought to do and countries within Europe, like Germany, is to find alternative sources, which means going out and buying LNG, liquefied natural gas from other places around the world, and trying to increase its supplies from countries like Norway and trying to find alternative sources to replace that Russian gas. But that comes at a cost. The price rise is so huge that even in outwardly affluent towns like Stratford, middle income in the middle of England, energy anxiety will become a mainstream economic experience. How expensive are we talking? It's expensive. If you think about the global

market, how energy itself is more expensive. And Europe does have the means and the ability to go out and buy natural gas at a premium. But that cost has to be passed on somewhere. And for example, in Germany, one of the debates they're having right now is this 400 euro tax that will be passed on to consumers to help pay for the increased costs of natural gas. So these countries that had relied on cheap, cheap energy from Russia all of a sudden got a real rude awakening. How's this gone over so far in Europe? I mean, it was just summer. Were people feeling the pinch or were they traveling as normal? Industry has been hit particularly hard as the cost of energy has gone up and some of them have had to cut back on manufacturing. One German aluminum factory is taking drastic action to deal with the mountain gas crisis. The 200-year-old GA Roders facility is due to be temporarily shut down. How are European economies faring so far? I mean, in the United States, obviously, we're talking a lot

about inflation and potential recession. What's up over there? Inflation is pretty bad here. You see it in not just, you know, the energy costs, but also for other things like food. And there are real fears of a potential recession as well, especially if some of these cutbacks on energy hit industry really hard. It was an IMF report today significantly downgrading global growth this year, which pointed out that in the European space, there could be even further downgrades should things get really difficult this winter. The ripple effect of this Russian war on Ukraine is really being felt in the heart of Europe. And you're starting to see it already. There are companies who say their energy costs are so high that they're going to have to pass

them on to consumers, which of course will mean that consumers have to pay more. And so there's a real concern about the state of the European economy and how hard it might be hit by compiling crises. Small businesses negotiating new energy contracts with suppliers face a four or five fold increase compared with prices negotiated two years ago. People were starting to realize that this energy crisis was coming and people talked about what might happen in the fall. And governments across Europe instituted campaigns to try to help people cut back on energy. French Prime Minister Elizabeth Bourne also telling companies they need to come up with their own energy sobriety plan next month as power shortages loom. The EU itself had come up with plans to help European countries cut back

on energy consumption. So there's definitely a mobilization in Europe, but I don't know, people were going on vacation and people were traveling. I can say for a fact here in Germany, nobody answered my emails in August because they were all in Italy or in Greece. So what are people in Germany saying? The reaction from people in Germany, I talked to people in Munich and Berlin, has been mixed. You know, people are definitely aware that a crisis is coming, but they're not really sure what they should do about it. I asked one guy, Christian, if he's done anything to prepare for a potentially cold and dark winter with high energy prices. I didn't really make any preparations

so that I have my jacket. For German consumers, they do their energy bills a little bit different. Some people negotiate their contracts far in advance, so they might be actually having a pretty good deal where others might have just negotiated it and may have like really high prices. And I talked to a few experts who basically said, look, it depends on what kind of house you have, if you're a homeowner, if you're a renter. But in a lot of cases, people really don't know what their energy consumption is until the end of the year. So in many ways, if this is for this winter, you won't really know until next year. And what a lot of households do is they pay an estimated fee of what they think their consumption might look like so that when they tally it up at the end of the year, they'll either maybe overpay and so they'll get money back or

maybe they'll owe some. So what a lot of people are doing is maybe paying a lot more in advance so that they can prepare for higher energy bills. But of course, not everyone can afford to do that. But I talked to one person at Oktoberfest who was trying to make sure that they were prepared for these increased energy bills. Oh, so you paid triple what you normally pay in a month? Exactly. We started out about with 160 euros and now we pay about 500 each month. So that's quite an increase. And I think part of it is, you know, people don't know what's coming this winter. And we've gone through two years of the pandemic here where they've already sort of been asked to sacrifice and prepare. And so they're being pretty circumspect about what's to come this winter. and otherwise after Corona and everything, you know, you can feel terrified about everything. So we are starting to live day by day,

knowing what is happening and trying to be more positive as we can. You know, this is our position about it. Hmm, I feel that. It could be that I'm totally oblivious, really, to the seriousness of the situation. That's also a possibility, that I'm not really aware just how much of a crisis this is. But maybe at the moment, I'm just

experiencing blind faith or optimism that everything will be okay. So that was Steve from Berlin, who expressed a sentiment that I heard from a few people, which is basically that they think the government is handling this pretty well and that they'll be able to give them the support they need to get through this crisis. So what are your feelings? Are you worried about anything about the energy crisis? Yes, a little bit.

You know, it's a big topic in the news. So yeah, a little bit. You know, it's a big topic in the news. So, yeah, a little bit worried. Why just a little bit? Because I think the government here is really working towards mitigating serious difficulties for people like me. You know, or just regular people is what I mean by that. And I think they will probably manage it. I guess I have faith in those in power. More with Jen on why the Germans have faith in their government in a minute on Today Explained.

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How has the German government made people feel like they got their backs during this impending crisis in Europe? Well, the German government has agreed to cut gas consumption by about 15% between basically now and March of next year to avoid gas shortages and spiraling prices, which is a target that the European Union has set. Ministers agreed on voluntary reduction of EU's gas consumption by at least 15% compared to its average consumption during the same period over the previous five years.

Today, we are sending a strong signal. The government has taken a lot of other measures, some which seem kind of quaint, but maybe when added together, they make a difference. So things like public buildings, not hospitals, but other public buildings are supposed to be heated to, you know, a maximum of 19 degrees Celsius, like monuments and statues. They're not lit up at night anymore. So if you're like trying to tour the city at night, everything is dark. In Munich, where I live right now, streetlights are turned off at odd hours to save energy, which can be a bit precarious if you're trying to cross the street in a weird area.

Swimming pools, the temperatures are turned down a few degrees. I talked to a person at the swimming pool. She said some people complained about it, but some people like the colder temperatures. Saunas are turned off. So there are all these little measures in addition to these larger campaigns, which are just encouraging people to cut back on energy. So colder showers are to take shorter showers, which I have not abided by. Sorry, Germany. Wow. You're taking long, hot showers when they have an energy crisis, Jen. Typical American. I am a typical American. I don't know what sacrifice means. That's taken for sure.

Wow. Okay. You're going to get America canceled. Are the Germans better at making the sacrifices? Are they doing a better job than Jen Kirby? I think so. I mean, I've talked to folks who are doing things like making sure that, you know, the lights are turned off when they leave the room.

And, you know, they don't know if this is actually going to make a difference, but they feel like they should try. So instead of showering the kids every day, they skip a day. And we've cut the water temperature down as well from 60 degrees, which we used to have, which was nice and toasty, back to 42, which is a little bit chillier. Are you taking any measures like shorter showers or anything like that? Yeah, yeah, i guess so i'm i'm inclined to be very like economic with uh energy in the first place you know like i'm

unplugging things overnight definitely taking shorter showers um i was thinking of getting rid of our freezer completely because i don't, I think we can live without a freezer quite comfortably. And this thing is just taking up energy the whole time in the background. Shout outs to Steve, who's just generally trying to do this, which feels like a good policy, considering even if there isn't a war in Ukraine, there is a climate emergency, Jen. That is true. And I would say that Germans in general are way more energy conscious than Americans. And so I think a lot of other people in Germany are trying to work that idea into everyday life. Or how are you preparing for a potential energy crisis?

Concretely, of course, we are a family. So we try to also to explain and teach to our daughter what to do in order to consume less, but not only about energy, about everything, you know. Also talking about a minimal life, about everything, no? Do you know this is like working, Jen? Are these personal sacrifices of German citizens amounting to much? I think it's really hard to say right now, because, again, we're still just exiting summer. And so it's all well and good to kind of cut back on your energy now.

But the real question is what's going to happen in the winter when energy demand goes way, way up. And, you know, the German government has taken steps to try to ease the pressure and the costs on people. They've passed many aid packages to try to give, you know, households, say, money back. But I do think that there is a question if some of the policies that they put in, like giving people money, will actually encourage them to reduce demand. And so there's a balance there between trying to ease the burden on people, but also really making it clear to people that they just can't use the same amount of energy that they always have. How is this affecting how Germany thinks about energy in the long term? What is clear is that the German government reacted pretty quickly to this, again, by, you know, they're rapidly building floating LNG terminals. The development of an infrastructure for liquefied natural gas, LNG, with a landing terminal in Wilhelmshaven will connect Germany much better to the global gas markets than before.

This strengthens competition between global gas sources and is beneficial to the end consumer in Germany. Which also have like hydrogen. So when that technology becomes available, so they are trying to think ahead about what a future will look like without cheap Russian natural gas. But industry and the country has been dependent on it for so long that there's obviously going to be growing pains. You know, one thing that the German government has done is to try to restart coal production, even though they're trying to stay committed to their climate goals. We decided to make it easy for companies to do the fuel switch so that they can go from gas to oil or coal with legislative support. And of course, there's been a debate about extending nuclear power, which we're supposed to be phasing out at the end of this year. And we decided that the two nuclear plants in the south of Germany

could continue to produce electricity in January, February, and March if necessary. And so there's a lot of debates about what this energy future will look like, both in the short term to get through this crisis, but also the long term when the German government remains committed to energy and climate goals. How prepared is the German government for the worst case scenario? I mean, in many ways, I think that's a little bit uncertain. I talked to a lot of experts who said, look, Germany has kind of hit these consumption targets so far. So this question of supply is, as it looks like, soft. And if they continue at this pace, it looks like maybe they'll be able to withstand the winter. It might not be the most pleasant

winter in the world, but Germany could should maybe get through it. That's a lot of uncertainty still. Like what if there's a really, really, really cold winter? We don't really know what this winter is going to look like until it's here and what it might even look like next winter, which could be just as bad. But a lot of experts I spoke to said they don't necessarily know if European governments have totally prepared their populations for just how much demand has to go down. And so that's a real open question. I think the lesson of the Nord Stream pipeline leaks is that European energy infrastructure is pretty vulnerable and Europe as a whole does not have a lot of margin of error to make up its supply if something goes wrong. You know, I didn't have sabotage in my bingo card of things that could go wrong, but maybe I should have. One thing Vladimir Putin is banking on is that people will be really angry

that their energy bills are going up or that they're, you know, potentially freezing during the winter. And that will create a backlash to some of the European Union's policies against Russia. There's a real question about the political and social stability in Europe that I would say governments are probably worried about. They are trying to reassure their populations that they have it well in

hand, but we really just don't know what's to come. I think they're trying their best. I think it's quite interesting to see that some people really don't care at all and sort of stick their head in the sand and others are very, very concerned like elderly people, my neighbors, they are very frightened. They live on a certain budget and if energy prices have tripled, I don't know how they can make it. Thanks to Jen Kirby at Vox for her reporting from Germany.

Our show today was produced by Victoria Chamberlain, edited by Matthew Collette, fact-checked by Laura Bullard, and mixed by Paul Robert Mounsey. The rest of our team includes Halima Shah, Avishai Artsy, Hadi Mawagdi, Amanda Llewellyn, Miles Bryan, and Siona Petros, who was once our intern and is now on the team for Real4Real.

Welcome back, Siona. Tori Dominguez is our audio fellow. Jillian Weinberger is helping us out this fall. Afim Shapiro is our director of sound. Amina Alsadi is our supervising producer. And Noel King is the host with the most. We use music by Breakmaster Cylinder. And Noam Hassenfeld, today explained, is on the radio in partnership with WNYC.

We're part of the Vox Media Podcast Network. I'm Sean Ramos for them. Happy 70, mom. Thank you.