Update: Goldman Sachs says energy crisis worse than 1970s oil crisis

Despite sanctions, Russia's oil and gas revenues allegedly grew in 2022

Image of Russian gas pipeline supply to Europe. Credit: dragancfm / shutterstock.com

13:10 (September 6) – Financial analysts Goldman Sachs have warned that the current energy crisis is worse than that of the 1970s oil crisis caused by the Yom Kippur war and the Iranian revolution.

Analysts from Goldman Sachs say that the current crisis could cost European households as much as €2 trillion by next year and that the energy market could account for as much as 15 per cent of the European Union’s gross domestic product.

The same analysts believe that short-term measures taken by respective governments could save around a third of the total cost but that the biggest savings will only be achieved in the medium to long-term. A tax on windfall profits could also soften the blow, but it is thought that all the measures that are taken in the short term could take between ten and 20 years to repay.

Whilst the UK looks set to take more drastic action in the short term, the cost to the country could according to analysts be far greater than that of the pandemic.

So where does the problem lie?

According to experts the wholesale price of energy is dictated by the highest priced source, in this case, gas. Although energy produced by gas is the last to be bought on the market, the higher-priced gas-based energy is what sets the wholesale price. That is what leads to some companies making super profits.

The EU is to meet on September 9 to discuss what measures can be taken in the short term. Perhaps the one they could take is to change the way the wholesale market works, which would for countries like Spain which produced a high portion of their requirement through renewables, see a significant drop in the cost of electricity.

For now, we will have to wait and see what steps the EU does take and in the meantime look for ways to save energy and in the process keep costs down. After all, much of the high price is down to the shortage of renewable energy that continues to drive the need for energy from other sources.

07:10 (September 6) – The Deputy Chief Executive of Gazprom Vitaly Markelov, has told news site Reuters that gas supply to Europe via the Nord Stream 1 pipeline is dependent on Siemens repairing the equipment.

When asked by Reuters when the pipeline would resume supplying gas he said:  “You should ask Siemens. They have to repair equipment first.”

Siemens Energy, the German giant, is bound by sanctions and is unable to assist. They did, however, say on Saturday that it had not been commissioned to carry out the work. But more importantly, the company said that the “oil Leak” Gazprom claims has shut down the compressor would not usually affect the operation of the turbine. It went on to say that the leak could be repaired on-site by Gazprom engineers and that other turbines were available for use at the affected compressor station.

The statements by Markelov and Siemens Energy confirm what the European Union believes, is that Russia is using gas to blackmail the bloc into lifting sanctions.

20:10 (September 5) – Russia says no more gas until sanctions are lifted making good on its threat to cut off supplies.

The Kremlin made the announcement on Monday, September 5 with Dimitri Peskov, the Kremlin spokesman.

The Interfax news agency quoted Peskov as saying that Russia will not resume gas supplies to Europe until the West lifts sanctions on Moscow for invading Ukraine.

He said that the only reason for the lack of supply is the western sanctions and in particular, those imposed by Germany and the UK. Continuing he said that Russia was unable to carry out essential maintenance work because of the sanctions, adding that: “It is these sanctions imposed by Western states that have brought the situation to what we see now.”

Gazprom, the Russian state consortium had said on Friday that the pumping of gas was being stopped completely. In the announcement, the company said that an alleged “oil leak” had been detected during maintenance of the only compressor station still in operation.

The company said: “Until the malfunction of the equipment is eliminated, the transit of gas through the Nord Stream gas pipeline is completely suspended.”

Supply to Europe was already down to 20 per cent due to scheduled maintenance.

At the time the Deputy Head of the Russian Security Council and Former President, Dmitry Medvedev, had warned that “there will be no Russian gas” in Europe if a price cap is implemented.

The announcement today has resulted in gas prices jumping 30 per cent and the euro falling to its lowest value against the dollar since 2002.

With Russia going through with its threat as it says no more gas unless sanctions are lifted, it remains to be seen what action the west will take. It does seem, however, that the only solution to the problem is to get around the negotiation table but there seems little appetite for that in Russia.

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Written by

Peter McLaren-Kennedy

Originally from South Africa, Peter is based on the Costa Blanca and is a web reporter for the Euro Weekly News covering international and Spanish national news. Got a news story you want to share? Then get in touch at editorial@euroweeklynews.com.


    • Dave Chappell

      06 September 2022 • 08:39

      This article is seriously flawed. You headline it “Russia says no more gas until sanctions are lifted”. This is plain wrong, and you should know it.
      The six Nord Stream I gas turbines, maintained by a British division of German energy company Siemens, remain sanctioned under British law – four of them are still in Canada, one has been transferred to Germany, and the last one is supposedly affected by an oil leak.
      The energy spokesman of the European Commission has said that Russia is “unwilling to deliver gas to Europe through other pipelines”. Those “other pipelines” have been closed by Poland, Ukraine, and Germany.
      Russia continues to deliver gas through the Brotherhood pipeline (to Ukraine!) and to Europe as well as through the TurkStream pipeline to parts of southeastern Europe.
      Russia is apparently ready to supply gas through the Nord Stream II pipeline, whose turbines are maintained by Russia, but Germany (under longstanding US arm twisting) has refused to open it.
      Russia continues to deliver oil to Europe through the Druzhba pipeline, although Ukraine temporarily closed the this in August.
      Your article ends by saying Russia has no desire to negotiate an end to the conflict, but this again is simply wrong. There is a crude and pathetic attempt to blame Russia entirely for the proxy war now being fought at everyone’s cost in Ukraine, especially ordinary Ukrainians, but this is driven by the provision of billions in arms from US – NATO warmongers, and the capitalist crooks who profit from war and instability.

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