Europe is experiencing its worst energy crisis in 50 years. Rising energy prices are fueling already high inflation that could seriously affect your savings. Here's how to protect yourself. 

Europe’s Energy Crisis: How to Prepare for Winter?

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Embrace the new reality: showering at work, limited oven use, no ironing…

This is what many Europeans may have to deal with this winter.❄️

As European gas and electricity prices skyrocket, millions of people are now forced to spend a large chunk of their income on energy.

According to Goldman Sachs Research, a typical European family could face 

What the energy crisis means for the economy 

Energy prices in Europe: what's happening?

 brewing in Europe as high energy prices have started to disrupt people's lives.

In the U.K., energy bills are expected to rise by 

 from October to 3,549 pounds on average. Gas, electricity, and domestic vehicle fuels will cost Britons 

 this winter, twice as much as in 2021, according to Carbon Brief's calculations of official data.

The average Italian family's energy bills have risen to 

 of total household expenses, up from 3.5% in 2019. In Germany, gas bills 

🤔 The numbers tell quite a story, right?…

Apparently, the current energy crisis is 

 than those of the 1970s and 1980s. The 1979 Iranian revolution and an oil embargo caused blackouts and long queues at petrol stations in the West, but the situation was not as bad as today.

A chart showing how Europe’s household gas prices soared during the 1970s, 1980s, and 2000s energy crises.

As you can see, gas prices in most top European economies in early 2022 surpassed the peak of previous crises in the 1970s, 1980s, and 2000s, according to the data provided by the International Energy Agency (IEA).

And there are fears that things will only get worse.

So what caused Europe’s energy crisis? 

For the most part, Europe’s power prices have skyrocketed for three reasons: the aftermath of the Covid-19 pandemic (

🙃), the war in Ukraine, and extreme drought.

A picture featuring power generators that were shut down during the Covid pandemic and couldn’t ramp up quickly enough to meet the increased demand for energy.

gas prices started going up last year as countries reopened from their pandemic lockdowns, causing a global spike in demand. Power generators that were shut down during the pandemic couldn't ramp up quickly enough to meet this new demand, thus driving the prices up.

a blue gas pipeline with the Russian flag symbolizing a halt in Russian gas supplies caused by EU sanctions and Russia’s retaliation after its invasion of Ukraine.

Russia’s invasion of Ukraine in late February only made things worse. European Union sanctions and Russian retaliation choked supplies of Russian natural gas, which heats buildings and powers generators in many European countries.

As Klaus Muller, head of Germany’s energy regulator, said: 

“Putin has played everything to the hilt. So every cut in Russian gas supplies has brought us price jumps. That is the price of this war.”

a picture of a dried-out European river that was affected by the heatwave that hit Europe in summer 2022.

 Weeks of baking drought this summer brought major rivers across Europe to their lowest levels in years, limiting the amount of river water used for cooling power plants and undermining coal supplies to generators. It's all bad for energy prices.

So, the effects of the Covid pandemic, Russia’s gas squeeze, and drought are among the key reasons behind Europe’s energy price spikes.

As a result, European governments are scrambling to find new energy supplies and bring household energy bills down.

The energy crisis will have some major effects on the global economy as well. 

How does Europe's energy crisis affect the economy?

This energy crisis impacts more than just your energy bills and energy-intensive industries. It’s also spilling over to food and drink supplies, adding to the supply shortage and sending prices even higher. 

Here’s how this energy shock could affect the world economy looking ahead: 

Many European countries may see even higher inflation

A cartoon man pulling a cart full of groceries and a green balloon with a percentage sign on it.

In 2022, inflation became a global phenomenon.🌍

In the Eurozone, a surge in household energy bills continues to fuel inflation to record highs: in August, it hit 9.1%.

Besides natural gas, gasoline has been a major driver of inflation over the past few months, and it doesn’t look like relief is on the way yet as crude oil prices continue to rise.

In the Eurozone, inflation is expected to hit double digits in the autumn due to higher gas prices, economists have warned:

“The surge in gas prices deals a new severe blow to the European economies. Higher prices for consumers and higher costs for companies will […] worsen the inflation outlook,”

 said Holger Schmieding, chief economist at financial company Berenberg.

Europe could go into recession if the energy crisis gets worse 

A recession in Europe is another likely consequence of the energy crisis, in addition to high inflation. Or at least that’s what analysts from BlackRock are saying.

"The energy crunch will drive a recession in Europe, as we've argued since March. The crisis has worsened since then as Russia has halted gas supplies,"

 analysts warned, citing the indefinite shutdown of Russia's Nord Stream 1 pipeline.

Obviously, E.U. leaders think they can avoid recession if they agree on effective measures to reduce energy costs. One such measure was the ECB issuing its 

 in August to control prices. Analysts remain skeptical, though:

"The European Central Bank isn't acknowledging how it will crush activity further by trying to fight high inflation, in our view. We think the ECB will wake up to this sooner than markets expect – but not before it inevitably faces a severe recession,"

Europe is now experiencing its worst energy crisis in 50 years.

Covid-19, the war in Ukraine, and Russia's gas squeeze are among the key factors driving up your energy costs. Moreover, skyrocketing energy prices are fueling inflation and could push Europe into a severe recession.

Even though you can't control rising energy prices, there are some things you can do to protect your savings. 

Track your spending and cut out unnecessary living expenses

Start building your gold and precious metals savings

In the end, if your finances are well-protected, the energy crisis and economic downturn aren't as frightening as they seem.🤓

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Good thing central banks can't print gold. 😉

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