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High Energy Costs Have Put German Industry at a Disadvantage | OilPrice.com
High Energy Costs Have Put German Industry at a Disadvantage

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Germany’s industry is unlikely to fully recover from the energy price shock and return to the competitiveness from before the Russian invasion of Ukraine, the chief executive of Germany’s top utility, RWE, told the Financial Times on Wednesday.

“The German industry has a disadvantage,” RWE’s chief executive officer Markus Krebber told FT, noting that Germany is now seeing structurally higher energy prices as it depends on LNG imports.

Despite reducing significantly its dependence on Russian gas, Europe remains exposed to natural gas supply and price shocks as it lacks any buffers in the system, Krebber told FT at the end of last year.

Thanks to two consecutive milder winters, natural gas prices in Europe remain well below the highest prices on record from August 2022, but they are still structurally higher than before the war in Ukraine.

Germany, Europe’s largest economy, will have to contend with structurally higher natural gas prices and demand destruction in energy-intensive industries, Krebber said in comments to FT this week.

“You’re going to see a bit of recovery, but I think we’re going to see a significant structural demand destruction in the energy-intensive industries,” RWE’s top executive noted.

Germany slashed its natural gas imports by 32.6% in 2023, as consumption also dropped. Last year, gas consumption dropped by 5% compared to 2022, while compared to the average consumption in the period 2018 to 2021, gas demand in Europe’s biggest economy fell by 17.5% last year, according to data from the country’s energy regulator Bundesnetzagentur.

Germany expects natural gas prices to remain high until at least 2027, the government said in a report last summer.

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Also last summer, INES, the group of German gas storage operators, said that Germany would continue to be at risk of natural gas shortages until the 2026/2027 winter season unless it takes measures to add LNG terminals, additional gas storage capacity, or pipelines.

By Charles Kennedy for Oilprice.com

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