If Putin continues to throttle the gas supply to Germany in the winter months, we will not only have expensive energy, but for many customers no energy at all. The state can alleviate hardship for private individuals and businesses, but cannot eliminate it. Here are the ten most pressing questions and answers about the gas emergency scenario.
At the top of the economy and politics, there is currently only one topic that nobody can be indifferent to: the impending gas emergency. If Vladimir Putin decides to further reduce the gas supply in the winter months, as he has already done in Poland, Austria and here since June, then we will be living in a different world.
1. How dependent are German private households on Russian gas?
Answer: There are 40 million private households in Germany. 20 million of them heat with gas. About 55 percent of this is supplied by Russian gas.
2. How dependent is German industry on Russian gas imports?
Classic industry in particular, i.e. around a third of German value creation, requires a constant supply of gas for its products. In 2021, 37 percent of German gas imports with a value of 14.4 billion euros were fed into the production process.
3. Who are the largest gas consumers in the country?
The largest gas-consuming company in Germany is BASF in Ludwigshafen. It alone accounts for around four percent of gas consumption in Germany. The chemical-pharmaceutical industry consumes a total of 15 percent of German gas.
4. What exactly happens when the Economics Minister declares the highest level of gas emergency in Germany?
Then the state can do two things that it is otherwise not allowed to do: First, it can allocate the gas quantities, i.e. portion and ration them. Secondly, he can intervene in pricing and suspend the previous conditions for private households and companies. The price should then go through the roof, possibly five to seven times higher.
5. Who has priority in this rationing policy, households or industry?
Clearly, preference should be given to private households. The Economics Minister is obliged to do this by the Federal Network Agency’s emergency plan. In industry, it is important to set economic priorities, which means that systemically important companies such as supermarkets and bakeries have priority over others such as large-scale industry or swimming pools.
6. Can the state regulations actually be executed, i.e. controlled?
Oh yeah! The Federal Network Agency based in Bonn is sitting on the trigger. It cannot, of course, control and regulate the supply of gas for every dwelling, but it can control and regulate the supply of gas for blocks of flats and individual industrial plants.
7. How can and how should private households react: For example, is it possible to go without heating for the whole winter?
That might be conceivable in Sicily, but not in Germany. The average temperature in November in Germany is between one and seven degrees, in December between three and minus two degrees and in January between two and minus four degrees, so that an unheated apartment would lead to serious illness and even death. Humans need a room temperature of at least 18 to 20 degrees to function.
Nevertheless, in such an exceptional situation, energy must be saved radically. It may be a case of not heating all the rooms, avoiding the use of the oven and switching from cooking with gas to cooking with electricity. A wood-burning stove could also be of good service.
Gabor Steingart is one of the best-known journalists in the country. He publishes the newsletter The Pioneer Briefing. The podcast of the same name is Germany’s leading daily podcast for politics and business. Since May 2020, Steingart has been working with his editorial staff on the ship “The Pioneer One”. Before founding Media Pioneer, Steingart was, among other things, Chairman of the Management Board of the Handelsblatt Media Group. You can subscribe to his free newsletter here.
8. What happens if the gas price actually goes through the roof. Can the state tolerate that?
He even has to tolerate it in parts in order to bring about the desired savings. After all, gas is not only expensive, it is actually limited. The state cannot eliminate this scarcity. The state will try to prevent social hardship and a wave of bankruptcies by deferring gas bills and thus state support for energy suppliers. But in general, all experts advise letting the price act as a control instance.
9. Are there really no sources of gas supply other than the pipeline from Russia?
Business and politics have done what needs to be done in the past few months. The purchase quantities from friendly countries were increased and the gas storage tanks were filled. But there definitely remains a gap that no government action in the world can quickly close. There are plenty of other technologies – solar, geothermal, wind power and also fracking gas – available, but not in a hurry. In a hurry, the only thing that helps is to extend the life of the three nuclear power plants that are still in operation, in order to save at least the gas that is now used to generate electricity.
10. Is it possible to estimate the economic damage caused by this gas emergency for the Federal Republic?
In any case, they will be serious and lead to a slump in the economy. Economists’ estimates vary between 3.2 percent for the economic slump and a minus of eight percent. In any case, unemployment, the poverty rate and national debt will rise noticeably as a result. The German economy will not collapse, but it will stagger noticeably.
Conclusion: Whitewashing does not help in this situation. The state, which is part of honesty, can alleviate hardship for private individuals and businesses, but it cannot eliminate it. If Putin plays hard, we not only have expensive energy, but for many customers no energy at all. That is what is new, what is threatening about this situation. The sentence of the Austrian author Ingeborg Bachmann applies:
“The truth is reasonable for man.”