As talks between Ukraine and Russia continue, Germany has released an early warning that there could be a shortage of natural gas. The Kremlin has recently warned that “unfriendly” countries would have to pay for Russian imports in roubles. G-7 countries have come out against that demand. A lack in energy payments could cause Russia to block certain exports and shut off European pipelines. This could spell disaster for Germany, Europe’s largest economy, as it imports approximately 55% of its natural gas from Russia. German Economy Minister Robert Habeck said Wednesday that the early warning doesn’t imply a state intervention to ration gas supplies. But, Habeck also brought up the idea of scaling back energy usage to protect gas reserves.
There has recently been a push in Europe to wane off of Russian imports after the invasion of Ukraine. However, few countries have the infrastructure to produce large quantities of energy. Germany for instance has only recently begun investing in terminals for direct domestic imports of natural gas. The US is also ramping up natural gas production and might be the largest exporter in 2022.
Investors remain cautionary as a potential energy crisis would hurt industrial production and consumption habits. For now, US futures are down after a broad market rally Tuesday with the Dow rising 338 points.