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Europe will see factories close amid rising energy prices

Europe’s gas and electricity prices are soaring and it seems as though this will remain the case over the winter months.

As a result, manufacturing companies are looking at closing their plants in an effort to minimise spiralling costs over a busy winter period.

Year-on-year front-month gas futures have increased six-fold, as Europe’s gas reserves are being depleted ahead of peak levels of demand seen during winter seasons.

Storage sites across Europe are three-quarters of capacity, according to Gas Infrastructure Europe. This is the lowest point in over ten years and well below the five-year seasonal average of 87.4% from before the pandemic.

Plant closures offer a variety of problems such as inflationary pressure and further supply chain issues.

Due to there being shortages across the world, Europe is unlikely to remedy the situation over the short-term, as the supply of gas is fixed, resulting in prices rising in North America and in Asia.

Lower consumption could be necessary to stop reserves plummeting to critical levels which would represent a risk of fuel supplies running out.

Logically, prices rising would deter consumption, but a question mark remains over whether or not governments can get their citizens to consume less fuel without disruption.

Or, whether they can do it in a more measured way, for example, by marginally turning down thermostats across the country, ensuring sufficient comfort.

Otherwise, a cold winter could be on the horizon for Europeans.

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