Gas prices, which have recently reached record highs of more than $1,000 per thousand cubic meters, have forced other fuel sources to increase in price.
Energy producers have been forced to switch to coal to meet European energy needs, which has driven up the price of coal.
According to data from market news website investing.com, coal prices on the Rotterdam market are now at their highest levels since 2008, costing over $200 per ton.
Supplies of gas through Russia’s Yamal pipeline have been unusually low this year, dropping to just 20 million cubic meters per day in mid-August, causing prices to rally across Europe, commodity intelligence firm ICIS told news outlet CNBC.
The reasons for this drop were previously unknown, however, many believe that Russia was deliberately manipulating the gas market to create demand for the recently completed Nord Stream 2 pipeline.
According to Ukrainian think tank Dixi Group, Russia has been throttling supply by refusing to use Ukrainian gas transportation networks, instead of relying on the TurkStream and Balkan Stream pipelines to isolate Ukraine.
This increased dependence on coal is bad news for the environment. Coal creates the most pollution out of all fossil fuels, producing nearly double the amount of CO2 per kilogram as electricity production from natural gas.
The European Union has been attempting to wean itself off from coal and is currently halfway towards closing all coal power plants in the EU before 2030.
Similar price trends have been observed in the price of oil. For the first time in three years, Brent oil prices have risen to above $80, Financial Times reported.
Analysts are now warning that the current energy crisis is likely to expand beyond Europe and become a global energy crisis.
In a comment to the Financial Times, global head of market strategy at Australian financial services provider Westpac warned of a “global energy crisis coming in the winter.”
Meanwhile, Ukraine is likely to face a difficult heating season.
Rising fuel costs are likely to put a great strain on the Ukrainian government which has previously guaranteed that domestic electricity tariffs and natural gas for heating would remain fixed throughout the heating season.
Over 56% of electricity in Ukraine is produced by nuclear power plants. According to Ahiia Zahrebelska, the founder of nonprofit Antitrust League, increased reliance on thermal power for electricity, paired with limits on nuclear energy, may also increase the need for coal for the heating season.
Ukraine is currently experiencing shortages in coal. As of Sept.8, reserves in the nation’s coal-fired plants were at 759,000 tons, less than half of the 1.8 million tons the government planned to have this time of year, according to the parliamentary energy and utilities committee.
Rising costs will be a burden on the state budget as it attempts to maintain its minimum reserves for the winter.
