Germany may take a 'painful' move to fire up coal power; Italy, and Austria also looking at burning more coal; surging gas prices add to already rising inflation.

FREMONT, CA: The largest consumers of Russian gas in Europe are scrambling to find alternate fuel sources and even considered burning additional coal to deal with the reduced gas flows, which could lead to an energy catastrophe in the winter if stockpiles are not supplied. Policymakers already concerned about rising inflation and a deteriorating economic outlook are further burdened by the crisis and expensive petrol costs. Russia's Gazprom reportedly notified Italy's Eni that it will only receive a portion of its request for gas supply, putting the nation one step closer to issuing a state of alert that will prompt gas-saving measures. Germany unveiled its most recent proposal to increase gas storage levels on Sunday and warned it could restart coal-fired power facilities that it had hoped to phase out. Germany has also experienced decreased Russian flow rates. The Minister of Economy, a member of the Green Party remarked that reducing gas use is hard though it is necessary for this circumstance. The Minister also urged for a quicker transition away from coal, which emits more greenhouse gases.

After the West implemented sanctions in retaliation for Moscow's invasion of Ukraine, a major exporter of wheat and a transit country for gas to Europe, Russia reiterated on Monday that Europe was solely to blame for the gas issue. The European benchmark Dutch front-month gas contract, which reached a high of 335 euros this year, was trading at approximately 124 euros ($130) on Monday. Despite the decline from that high, the contract is still up more than 300 per cent from where it was a year ago, just before gas prices began to soar. Power prices could take three to five years to return to lower levels. Even if they had slightly increased from the beginning of last week, Russian gas supplies to Germany through the Nord Stream 1 pipeline, the primary conduit supplying Europe's largest economy, were still operating at approximately 40 per cent of capacity. Ukraine, a second transit country for Russian gas, asserted that any supply shortfall via Nord Stream 1 could be filled by its pipelines. Moscow has previously asserted that it is unable to use the pipes to pump any more oil than Ukraine has already stopped allowing.

Although Europe's gas inventories are still filling, however more slowly, Eni and German utility Uniper both claimed they were receiving less Russian gas than what was agreed upon. On Monday, they were roughly 54 per cent full compared to the European Union's goal of 80% by October and 90 per cent by November. According to Germany's economy ministry, restarting coal-fired power plants could provide up to 10 gigawatts of capacity if the gas supply falls below a certain threshold. On July 8, a law about the change will be presented to the upper house of parliament. In case limited gas supplies result in an energy emergency, Austria's government and utility Verbund decided to convert a gas-fired power plant to utilise coal. While other European nations have also experienced gas supply difficulties, consumption has increased abnormally high for the time of year following a heatwave increased use of air conditioning. Germany and Italy are among the countries most dependent on Russian gas.

Due to the equipment being maintained by Germany's Siemens Energy in Canada, Russia's state-controlled Gazprom this week reduced capacity along Nord Stream 1, a significant pipeline serving Germany and other countries.

Officials from Germany and Italy claimed that Russia was using this as an excuse to cut supplies.

Italy has stated that if Russia keeps reducing supply, it may announce a higher state of alert on gas this week. The action would set off a series of measures to cut usage, such as limiting gas to a subset of industrial users, increasing coal power plant output, and requesting additional gas imports from other suppliers under existing contracts.