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Germany Facing Critical Energy Shock

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By Stefan Nicola
UPI Energy Correspondent
Kehl Am Rhein, Germany (UPI) Jun 23, 2008
Soaring energy prices are threatening the German economy and the stability of the German government, and are poised to become a big issue in the next election campaign.

In Germany, at the local gas station, you can feel the anger sparked by the rising prices for gasoline. After a 21-percent increase in just over a year, a liter of unleaded gas these days costs as much as 1.55 euros. To put this into context for the U.S. reader, imagine having to pay $9.20 for your gallon of gas -- you might even reconsider buying that SUV you saw on television last night.

It's not only car fuels, however. Costs for electricity have soared, and so have prices for heating oil and gas.

German energy giant E.ON has announced it would have to raise the prices for heating gas by 25 percent over the next six months, and some 100 regional gas suppliers have said they would follow suit with price hikes of up to 40 percent.

According to German newsmagazine Der Spiegel, Germans in 1997 spent some $108 billion on electricity, heating and car fuels. In 2007, a year with a relatively mild winter, Germans spent almost $150 billion.

Already, financially weak citizens are having trouble paying their energy bills. While the German government in the past has effectively promoted efficiency measures for electricity, there is not much you can do to lower your heating bill.

This leaves angry citizens and -- this is the key here -- voters. Energy security has been an important issue since 2006, but it was confined to elitist circles. Today, even senior citizens know about Gazprom and Germany's dependence on Russian energy. Both government parties have become aware of the fact that energy is becoming a hot issue.

The Social Democrats in the past weeks have called for a catalog of measures to protect the poorest from the effects of soaring energy prices, and German Chancellor Angela Merkel has raised the issue at bilateral meetings with several world leaders.

The problem, of course, is that the energy issue is being used by populists to score short-term election successes: Some left-wing politicians have called for a certain amount of electricity to be free of charge, and others have threatened taking Germany's energy suppliers to court if they go through with the announced price hikes.

Some politicians also have indicated they want to end a 40-year tradition when it comes to German natural gas prices. In Europe, the price for heating gas is linked to that of oil, so any oil price hike is going to affect natural gas prices. Naturally, the latest oil price frenzy is playing into the hands of Russian gas producers, who are able to sell their natural gas at high prices. That's why German politicians have called for an end to the oil-gas price linkage, arguing it's a thing of the past in times of volatile energy markets. The linkage, however, is part of long-term supply contracts, and it would not be in Russia's immediate interest to alter those.

No matter what happens over the next 12 months, energy will still be a big issue when Germany goes to the polls in 2009. Then, the conservatives will likely play the nuclear card. Right now, Germany plans to shut down its more than 20 nuclear power plants by 2021. The conservatives will argue that the nuclear phase-out promoted by the Social Democrats isn't the right answer to climate change and rising oil and gas prices. Then, energy could make or break a government.

Source: United Press International

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Russian Premier Urges Stable Power Supply After UES Reform
Moscow (RIA Novosti) Jun 19, 2008
Russian Prime Minister Vladimir Putin urged on Wednesday the provision of stable electric power supplies after Russia's electric power monopoly ceases to exist.







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