Gutting Germany — Part 2: Natural Gas

A story of economic suicide in the face of resource depletion

10 min readDec 9, 2022


Image source: Pixabay

Europe in general, and Germany in particular face very tough years. Their economies are under a self-imposed siege with no end in sight, shooting energy prices through the roof and sending industries abroad in search for cheap fossil fuels. In Part 1 we have discussed the case of coal, seen how recent events fit into the much larger scheme of resource depletion and how all was made much-much worse by bad policy decisions. Now, let’s review the case with Natural Gas and the proposed solutions to the crisis at hand.


Contrary to modern myths, depicting Germany as a leader in clean energy, the chart above shows what has really happened in the past 30 years: gas has replaced depleting coal, and wind has replaced declining nuclear power. While the current state is (somewhat) better in CO2 emission terms than it was thirty years ago, it has made Germany hopelessly dependent on natural gas imports. This constant need for gas has become a vulnerability, one which has been ruthlessly exploited — but let’s just not get ahead of ourselves yet.

We have already seen that the true reason behind German coal’s demise was resource depletion and not climate consciousness. Once cheap and abundant, though polluting, coal was gone it had to be replaced with Nat Gas in electricity generation, as the next cheapest option. Nuclear has lost its appeal after Chernobyl, and replacing aging plants turned out to be fairly expensive too; thus its role in electricity generation has been taken over by wind energy. As we will see, however, this was not a problem free one to one exchange, and it has come with some rather serious drawbacks.

The green miracle called the ‘Energiewende’, reducing Germany’s CO2 emissions, could only happen because Nat Gas has killed two birds with one stone. It has made up for the fall in coal production, while simultaneously made it easier to balance hopelessly intermittent ‘renewables’ across the day and over the seasons, thanks to underground gas storage facilities.

Take natural gas away from the picture though, and what you are left with is a) inadequate electricity generation in general, and b) intermittency (i.e. blackouts) due to a relatively large amount of renewables in the mix and no backup for long, cold, windless winter nights.

Enter 2022 and the war. Before the recent escalation of events in Ukraine, Germany used to import 50% of its coal, 55% of its natural gas, and 31% of its crude oil from Russia. This has represented a combined 33% of Germany’s total energy use — not something to get rid of easily in a world of strangled fossil fuel supplies.

Despite the warlike rhetoric though, natural gas exports to Germany kept steady throughout the first half of the year — allowing gas storage facilities to be filled up to 82% full by the end of August. Then Gazprom, after giving several warnings, decided to turn off gas flows in a response to European agencies coming up with all sorts of “regulatory changes” resulting in an equipment stuck in Canada for months, export licenses being revoked, and gas transits being refused. The alternative route through Poland (the Yamal pipeline) was shut off earlier that year, following the nationalization of this key piece of energy infrastructure by the Polish government.

Were the eventual seizure in Russian gas-flows not serious enough, both Nord Stream pipelines were blown up shortly thereafter, in September. The sabotage happened in an area frequently patrolled by NATO ships and helicopters, and just days after protesters came to the streets to urge the opening of Nord Stream 2. In a rather curious twist to the story though neither Germany nor Russia was allowed to investigate what has happened to their own property. Instead, the Swedes who had been collecting the evidence, have classified their findings as sensitive information related to their national security, and denied to comment on who was the perpetrator (1).

Regardless of who was behind the sabotage, the price of energy (both electricity and gas) went so high up in August that it has effectively killed 25% of German industrial demand in the third quarter alone — well before the heating season has started. In practical terms this has meant losing half of Europe’s aluminum smelter and steel manufacturing capacity, and resulted in BASF (the biggest German chemical conglomerate) downsizing its operations permanently on the continent… Meanwhile the Inflation Reduction Act has been accepted just at the right moment, luckily, to accommodate poor fleeing European businesses.

The resulting cuts to gas consumption, deep though they were, will still not be enough. In order to survive this winter Germans needs another 20% reduction in gas use in the coming months — and presumably throughout 2023 as well, if the country is to refill its gas storage, ever (this time without Russian pipeline gas). Should this reduction in consumption come about, it would logically imply giving up another 20% of industrial demand in Germany — depending on how much of the lost Russian pipeline supply (55% of the total!) can be replaced with expensive LNG shipments.

Germany’s gas problems did not start in August, or on February 24, 2022 however. Just as it was in the case of coal, we have started to see a worldwide shortage of methane back in 2021 already, hitting Europe the hardest.

Natural gas prices in Europe were hovering around 20 Eur/MWh (or around 5 USD/MBtu) for the better half of the past decade. Roughly on par with, or slightly above US domestic prices — at least until 2021. Source

What has happened in the summer of 2021 then? Who or what was behind the sudden rise in gas prices? Was it Russia meddling with pipeline imports already, well before the shooting began? Let’s take a look at the numbers:

Russian pipeline gas imports to Germany. Note: the drops in July (year after year) are due to planned maintenance activities. (Unit of measure million cubic meters (mcm) per month. 5k on the chart translates to 176 billion cubic feet per month or 5.86 bcf a day.) Source

Nah, as you can see on the chart above nothing has changed for years on the pipeline front, not until the summer of 2022 at least. What about LNG supplies then? (Note that Germany still does not have a functioning LNG terminal yet, so it has to import regasified LNG from neighboring countries.)

Daily flows of natural gas to Northwest Europe. Note how the black line on the chart above debunks the fairy tale of Norway filling in the gap left behind by missing pipeline imports. Source

Whoa! LNG imports (blue line) are something to behold: they were all over the place from one to ten billion cubic feet per day. No wonder: spot (on demand, not contracted) LNG is a seller’s market, where the highest bidder gets the delivery — if there is anything to buy at the given moment. Long term contracts on the other hand are hard to get, and still at least three times as much expensive as pipeline gas.

If there was a reason behind the price hikes back in 2021 then, it was the tight LNG market and a chronic under-delivery to Europe in the first half of that year. 2021 thus has also made it abundantly clear why Germany needed NS2: to prevent similar price hikes from developing, and to avoid being forced to rely upon unpredictable and very expensive LNG flows.

Like it or not Germany’s economic fate is sealed without pipeline gas.

What about the much touted green transition then, making both gas and coal ‘unnecessary’ anyway? Well, as you can see below, wind generated electricity was (and always will be) very seasonal, producing its highest peaks in January/February on a monthly average basis — not considering the occasional windless cold weather besetting Germany and many other European countries for weeks. Currently there is no scalable solution, other than storing natural gas in underground storage then burning it in power plants, to iron out intermittencies caused by still, cold weather and seasonality. The same simply cannot be done with electricity on any meaningful scale today.

Notice the high seasonality (3–4x difference) in actual wind power production, lowest in the summer months exactly when the most gas needs to be diverted to storage. Source

It was exactly wind’s seasonality which was fanning the flames of the gas crisis even higher in the summers of 2021 and 2022 (pun intended). Wind energy produces at its lowest in the hottest months: exactly when the most gas would need to be diverted to storage and the most electricity is needed to drive irrigation pumps and air conditioning among many other things. With low wind generation over the summer though gas needs to be burned to compensate the lack of electricity supply instead— thus driving demand sky high. And while sometime, far-far into the future, gas heating might be replaced with electric / geothermal energy, or solar might compensate the lack of wind, it will not help preventing serious gas shortages in the following years. This is an immediate crisis, which needs to be solved with whatever tools at hand. Wind and solar will not be one of them.

So, what can be done? On a positive note Germany has finally struck a long awaited deal with Qatar to import 2 million tons of LNG annually — delivered by the US’s very own ConocoPhilips. A “tremendous opportunity” indeed… (To whom exactly?)

High costs notwithstanding, does this mean that the German industry is now saved? First, they must wait until 2026, and pray very-very hard in the meantime that the industry doesn’t leave by then. Should they survive the coming 3 years though, they would still be getting a mere 2 million tons (2.76 billion cubic meters) annually — from Qatar, a country supposedly tapping into the biggest known gas reserve on the planet. For comparison, this is less than 2.5% of the combined annual capacity of the now defunct Nord Stream 1 and 2 pipelines (110 bcm/year)... That means Germany would need forty more deals like this to catch up with its lost pipeline capacity.

Screenshot taken from Searoutes depicting the route between Qatar and Germany. Note, that the distance is measured in nm (nautical miles) and is equal to 12456 km-s.

Remember, all this is happening to a country keen on reducing its CO2 impact on the planet… What is a better way to achieve this goal, than by having another country super-chill natural gas at a great energy expense (and CO2 output) on your behalf, then ship it 12456 kilometers by burning ever scarcer diesel fuel? (Which, by the way, Germany can no longer import from its biggest supplier from February 2023, thanks to the refined product ban, nor can they produce it in previous quantities due to the oil embargo coming into effect on the 5th of December)… Good luck refueling those ships to make their journey back to Qatar then.

Who will supply more LNG then to fill in at least some of the gap till the Qatari ‘silver bullet’ arrives? The US? No, they won’t have any more liquification capacity til at least 2024 either… And even then: what’s the guarantee that they will have gas to send? In the meantime Russia is already selling near record amounts of LNG to Europe:

Exports of the liquid gas rose around 20 percent between March and October compared to the same period in 2021, according to Rystad Energy. Shipments of Russian LNG in the year to September totaled 1.2 million tonnes, equating to between $1 billion and $2 billion.

Make no mistake: this 1.2 million ton delivery (in 2022 till September) is still peanuts compared to pipeline deliveries, but were ‘filling up Russia’s war coffers’ with billions of dollars nevertheless. Why not ban LNG as well?

Seen in the light of finite resources — why, natural gas, especially in LNG form is very much finite — it’s no wonder that the Asian spot LNG imports have simply collapsed throughout 2022. Something got to give. This has left Pakistan with 12-hour rolling blackouts and drove up coal and diesel burning all throughout South-East Asia (Gas Market Report, EIA page 24); contributing greatly to the already severe coal and diesel shortage.

Ukraine got the worst of it — there is no question about it — with rolling blackouts, destroyed infrastructure and hundreds of thousands killed or maimed — yet the sanctions did nothing to prevent these from happening. The “regulatory changes” enforced by the West have reportedly failed to achieve their original goal of breaking the Russian economy. On the other hand they were rather ‘successful’ in pushing Europe into a recession: effectively excluding it from the competition for finite resources for a very-very long time. Its industries are forced to leave the region, while enriching fossil fuel companies beyond measure.

A relentless push in this direction is hard to interpret otherwise than an economic death wish.

Make no mistake: that this would happen should — for any reason — Russian pipeline gas flows stop, was a long know fact. As the US’s very own RAND corporation has pointed out back in 2019, in their report titled rather tellingly ‘Overextending Russia’:

…alternative gas supplies are likely to be more expensive in terms of both infrastructure costs and gas prices. If governments subsidize the infrastructure, they will have to reduce expenditures for other purposes or raise taxes, both of which might create a drag on the economy. Higher gas prices will reduce the ability of Europeans to purchase other goods and services, also creating a drag on the economy.

Some ‘EU officials’, slow learners they may be, have finally realized the truth to the statements above and their logical consequences:

“The fact is, if you look at it soberly, the country that is most profiting from this war is the U.S. because they are selling more gas and at higher prices, and because they are selling more weapons,” one senior official told POLITICO.

I let you draw your own conclusions on who has actually exploited Germany’s vulnerability to gas imports, but one thing is for sure: high gas prices (combined with physical shortages) are here to stay for a very long time. Deindustrialization seems to be all but guaranteed.

Until next time,



(1) The whole Nord Stream explosion story begs a number of unpleasant questions. Whose best interest was it to keep this as a secret? Had Sweden’s pending NATO membership anything to do with all this? Who opposed Nord Stream 2 the fiercest right from the get go and threatened to end the project one way or the other? Who had the technical means to do it in NATO patrolled waters? Who won the most both in long term strategic and short term business terms? Whose best interests were on the top of EU Commission’s president mind when she pushed policies leading up this point?

Finally, why didn’t Germany fight for its right to get answers to all these questions?




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