Germany’s animal energy crisis, the Minister of Economy warns of market collapse

The war in Ukraine raises concerns about the energy crisis in the countries of the European Union (EU). Several of them have already drawn up contingency plans to insure themselves against this situation, albeit at the expense of the environment. One of them is Germany, which is now warning against the so-called Lehman Brothers effect in the entire public services sector. The portal deals with the topic Business Insider.

Germany, Europe’s largest economy, joined the second of three contingency plans on Thursday. It has done so in response to the weakening of supplies from Russia, which has deepened concerns about the energy crisis. Uncertainty in the market has caused European futures for natural gas since the beginning of the year increased by up to 85%.

Futures can be understood as a contract between two entities to purchase an asset at a certain time in the future. The price of the asset is currently set.

Market failure is a real threat

The second stage of the German emergency plan allows energy companies to pass on price increases to their customers. Germany has abstained from this clause for the time being, but according to Robert Habeck, the German Minister for the Economy, it could apply if the supply and price crisis continues. Suppliers who buy energy on the wholesale market show high losses, which may lead to bankruptcy.

“If this minus is so big that they can no longer bear it, there is a risk that the whole market will collapse at some point.” warns Habeck. He directly referred to the collapse of the American bank Lehman Brothers, which is associated with the start of the global financial crisis at the end of the first period of this millennium.

According to the German Ministry of the Economy, natural gas accounts for a quarter of the country’s energy mix. About 35% of this gas is imported from Russia.

“We are in a gas crisis”

Russia’s largest gas company, Gazprom, cut gas supplies through the Nord Stream pipeline last week. For this reason, several countries, including Germany, fear a shortcoming that could lead to a switch to an allocation model.

The situation is bad now, but it can be even worse in the winter, as gas consumption usually rises sharply then. “The situation is serious and winter is coming,” says Habeck. “It will be a rocky road that we now have to take as a country. Even though you don’t feel it yet: we are in a gas crisis. Gas is now a scarce commodity.

Russia claims to have limited gas supplies for technical reasons. However, Germany is of the opinion that this step was politically motivated. “We must not have any illusions: restricting gas supplies is Putin’s economic attack on us,” Habeck said in a statement Wednesday. “It is clearly Putin’s strategy to create uncertainty, raise prices and divide us as a society. We will fight against it. “