German Natural Gas Consumption During the August Industrial Recession: Preliminary Data, Energy Prices, and Forecasts for 2021-2021
German Chancellor Olaf Scholz has assured Germans that they will have enough power to make it through the winter. “Germany’s reserves of natural gas are currently over 100%, so they will last for at least two and a half months,” says Ben, an economist at the London School of Economics.
Preliminary data released by the country’s statistics office on Friday show that industrial production fell in August. Supply chain bottlenecks caused by the coronavirus crisis and the war in Ukraine continue to weigh on producers, the office said.
The chief economist at ING Germany said in a Friday note that there was a likelihood of an economic contraction, and energy prices remained high.
It is becoming more likely that Germany will suffer a deep recession. The country employs 7.5 million people in the industrial sector.
When Russia invaded Ukraine in February, the energy price went up even higher, sparking an energy standoff between Europe and Moscow.
Energy costs at Prysmian’s six German factories are expected to soar to €20 million ($20 million) this year from just €5 million ($5 million) in 2021. Next year, costs are predicted to hit €35 million ($34 million) — a 600% rise from 2020.
He said that the energy price has changed from being a cost in the business to being something which can really close the business down.
Energy costs continue to put pressure on consumer prices, even though Germany’s stores are currently full and a successful race to fill gas storage facilities ahead of winter.
In a study published earlier this year, Kuhn and his colleagues analyzed Germany’s natural gas economy. They said the country could make it through the winter without power cuts if it could reduce its gas use by 20% and shift where its natural gas came from.
According to CNBC, as many as 2 million workers are expected to be forced off the job next spring as their employer battles high prices and shortages of gas. That’s roughly one third of the numbers furloughed at the height of the pandemic in April 2020.
Insolvency of Germany’s paper-making region has caused drastic cuts to its production in the past three months, according to Prysmian
Prysmian made permanent cuts to its workforce. Persson said he had laid off about 10% of staff in his region, which covers Germany, Romania, Hungary and the Czech Republic, over the past three months.
The report said the time may be the starting point for an accelerated deindustrialization in Germany.
According to a survey last month by the Confederation of European Paper Industries (CEPI), two-thirds of paper producers on the continent have cut their production, while just over half have temporarily closed.
It takes a lot of energy to make paper. Hakle blamed rising energy and material costs for its insolvency last month.
Many small and medium-sized German businesses are family-owned and deeply embedded into their communities as the country’s “Mittelstand”. They are less able to absorb energy price shocks than industry behemoths.
One of the biggest cable producers, Prysmian, is also struggling. In the past six months, Persson cut production in his region by 5%.
Source: https://www.cnn.com/2022/10/07/energy/german-industry-energy-prices/index.html
The European Glass Industry is Doomed by Gas Prices: Implications for the Automotive Industry and the Industrialization of the Euro-Peripheral Europe
There is help at hand. The German government has so far promised to spend nearly €300 billion ($294 billion) to help millions of households and businesses cope as prices soar. As much as €200 billion ($196 billion) of that support could be funded by government borrowing.
Such whopping sums have sparked criticism. Claude Turmes, Luxembourg’s energy minister, said last week there was an “insane race” by governments to outspend one another.
There is a risk that the Czech glass industry will be killed off if Germany subsidizes its glass industry.
Germany thinks generous handouts are causing problems with its EU partners, but that the heart of its economy is at stake. Some manufacturers are already moving parts of their operations abroad.
Companies have relied on the steady flow of cheap gas from Russia since the 1990s to fuel their factories. That energy source is now “vanishing,” Zachmann said, pushing businesses to find alternate sources, or move energy-intensive activities to other countries.
That has been done by Prysmian. At the start of last year, Persson moved the gas-guzzling production of cable conductors from German factories to Hungary and the Czech Republic to save money. He is cutting energy consumption by buying parts from Turkey rather than manufacturing them in-house.
“[We are] trying to move away from Germany [for energy-intensive products] for the simple reason that it is very hard for us to sustain the production,” he said.
Pressures can be seen elsewhere in Europe. The two biggest chemical companies in Europe slashed their production of ammonia due to high gas prices. Yara International
(YARIY)’s European ammonia production is running at just 35% of its capacity, company CEO Svein Tore Holseter, told CNN Business.
According to a September survey by VDA, Germany’s automotive industry association, 85% of car makers view the country as an uncompetitive location because of high energy prices and insecure supply. About 3% of companies plan to invest in the country while 22% want to shift their investments abroad.
As energy prices will stay on higher levels, energy-intensive branches will relocate. In total, we do not expect a full blown deindustrialization of the economy, says the research director at the Kiehl Institute for the World Economy.
Stock up on Candles: Why Germany is Stocking Up On Candles During the Great Petropiolodide Crisis? A Case Study in Germany
The candle boom began during the pandemic, after the government imposed lockdowns and Germans began spending a lot more time at home. The industry expected the boom to end once the nation opened back up, Thomann says. “But then the war (in Ukraine) started.”
Before Russia’s invasion, Germany was receiving more than half of its natural gas from Russia. It was Russia’s biggest natural gas customer in the European Union, and many Germans used this gas to heat their homes, generate electricity, and power their factories.
The German government has been working to reduce gas consumption and diversify its energy supply. Early this fall it enacted new measures aimed at reducing gas demand to help Germany make it through the winter. If you want to do things like turn off the lights on the billboards, or use less hot water, you should do it in Germany.
“There’s regulation for all public buildings. “You don’t heat the floors anymore, lecture halls, and so on” is the logic according to an economics professor at the University of Bonn. His university gave professors thermostats to keep the temperature down in their offices. Kuhn gets to keep his office’s temperature at 19 degrees Celsius, or 66.2 degrees Fahrenheit — the maximum temperature that offices are now allowed to be heated.
Source: https://www.npr.org/sections/money/2022/12/20/1144258347/facing-an-energy-crisis-germans-stock-up-on-candles
Germans are successfully transitioning away from Russian energy: How can we prepare for a power outage? An economist’s perspective on German life in transition
There are still reasons for Germans to be concerned. “Gas storage is like your phone battery,” Moll says. The lack of Russian gas is as similar to missing your phone charge on a trip. “You wouldn’t get excited about the fact that your phone battery is charged a hundred percent because you still know that it’s only gonna last you for a day.”
The government of Germany encourages people to be prepared in case of a power failure. This fall, the Federal Ministry for Economics and Climate Protection put out public service announcements about how people can conserve energy. The German Office of Civil Protection and Disaster Assistance gave advice on how to prepare for a power outage by wearing lots of warm clothing, keeping torches around and taking care of your batteries.
Germany’s utilities agency has warned against using mobile heaters too much, for fear they will max out the power grid.
According to the economist from Bonn, his friends and family have been trying to buy firewood to heat their apartments but it is not available. If you try to find anything you can burn in your oven at the store, you won’t find anything. It’s just all sold out or has ridiculous prices,” he says.
All this said, the economists we spoke to told us that Germany is successfully transitioning away from Russian energy. Guntram Wolff is from the German Council on Foreign Relations.
Germany hopes to have 100% renewable energy by the year 2035. Where we’re going is exactly where we want to go. It’s just like we moved a little bit quicker in the transition.