Editorial: A new outbreak of energy hostilities in Europe could be felt here

Europe's energy crisis loomed larger over the weekend after Russian energy giant Gazprom said it couldn't resume the supply of natural gas through a major pipeline to Germany, for now. Photo / AP file

Editorial

New Zealand is headed towards summer, but winter could still be coming here, in the form of a fresh bite at the fuel pumps.

A new outbreak of energy hostilities has been signalled in Europe between Russia and the West, and that could flow on to New Zealand through higher prices.

Over the weekend, Russia indefinitely suspended gas flows through a major pipeline to the West that runs into Germany, after the flows were previously halted last week.

Wholesale gas prices could rise at a time when European countries have already drawn up complex plans to try to get through their upcoming colder months.

The shutdown, blamed by state company Gazprom on a fault, will be widely viewed as more energy blackmail from Moscow towards the European Union, because it came after a Group of Seven financial push to put a price cap on Russian oil.

It appears that the Russian regime is stepping up use of its leverage with winter looming in the north - and the threat of power cuts to homes and businesses with it. There are fears of what shortages could mean in Europe's linked energy market.

For its part, G7 countries want to reduce the amount of revenue Russia gets from oil to squeeze the funds President Vladimir Putin has to keep his war going in Ukraine.

Importers requiring insurance and shipping services would need to keep to a price cap when shifting Russian oil. Its transportation above a certain price would be banned. Russia could make this process less effective by finding new markets for its oil.

Europe usually gets about 40 per cent of its gas supplies from Russia. Gazprom was sending 20 per cent less gas through the Nord Stream 1 pipeline before the shutdown.

In recent months, as the war has raged and Russia has been under sanctions, Moscow has been reducing supplies to Europe, pushing prices up. This has meant that Gazprom has made up for falling demand for Russian oil by getting more revenue from less supply, thanks to the higher prices.

European countries have been storing gas in preparation for greater usage. Summer has given way to autumn, so energy demand will rise, with months of difficulty ahead.

This is Russia's wider front with the West beyond the battlefield in Ukraine, and various economic weapons are on the table. If it goes badly, inflation could remain high for some time. Putin could cut Russian gas off completely to Europe, which would get countries scrambling to source energy supplies from elsewhere to fill gaps.

A Europe under more economic pressure would further the war's global impact.

The Government here has said previously that none of New Zealand's fuel supply is sourced from Russia. But the country relies on tanker-imported fuel. Both the importation of fuel and the shipping of it exposes the country to price rises.

New Zealand, in common with other countries, will only be cushioned from energy shocks when a substantial part of our energy is made up of our own renewable supply.

It's a longer-term goal, but it reflects a lesson learned about investment in supplies - during the pandemic with medical equipment and research, and over the housing crisis with the new-build programme.

In the current economic uncertainty, the war is an ongoing source of instability.