oil shortage in germany
The Russia-Ukraine war has resulted in surging oil prices throughout Europe, severely impacting the whole European economy. Until Russia’s invasion of Ukraine in February 2022, 40% of the oil consumed by the European Union was imported from Russia. This highlights the EU’s heavy dependence on Russian oil, the absence of which has added to the rapid inflation that resulted from supply chain problems and high demand throughout the past two years. The resulting spike in oil and gas prices is especially evident in Germany because the country is mostly dependent on its automotive sector, mechanical engineering, chemicals, and electrical industries.
These four sectors require heavy energy input and are thus critically affected by increasing oil and gas prices. For example, the German steel industry has seen energy input costs increase tenfold throughout the past year, making it nearly impossible to remain profitable. Moreover, steel producers are crucial vendors for the automotive industry and several other major businesses, thus proving a destructive domino effect for the German economy rooted in surging energy prices. This alarming trend raises the question of whether the german industry can sustain the high oil and gas price levels for an extended amount of time, considering that it is uncertain when and if the Russian-Ukraine conflict will end.
Although these facts present a grim outlook for the German economy, the European Union would certainly provide support for Germany in this extreme scenario, which seems highly unlikely. Moreover, a sudden relief has been the uncommonly warm weather throughout the past two months in Europe, minimizing oil and gas consumption as well as relaxing energy price levels. It will be interesting to follow upcoming developments of the German economy and what solutions the European Union will find to curb the lack of Russian oil imports.
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