Europe energy squeeze: New Zealanders told to expect price rises from power crisis in EU

As the weather cools in the northern hemisphere, the demand for energy continues to climb.

And with the ongoing war in Ukraine putting pressure on fuel supplies, Europe is rapidly heading towards an energy crisis

So how could that energy crisis affect New Zealand?

"We do import some fuels, etc so we are experiencing price increases from those," explained Mark Riggall, a portfolio manager at Milford Asset Management.

"Also, goods; to ship goods anywhere it obviously takes fuel and to produce those goods, in many cases, takes energy as well so we will experience some price rises - but not directly."

Riggall told AM on Thursday said the energy situation in Europe was "almost extraordinary".

"Yes, it's all to do with the Ukraine situation and the fact that Russia and [Vladimir] Putin are turning the screws on Europe."

Overnight, Russia halted gas supplies via Europe's key supply route - intensifying an economic battle between Moscow and the EU.

"Because we've had summer in the Northern Hemisphere, household power usage hasn't been very high and so as we go into winter we've got two things happening - power bills are going up because people are using more energy to heat their homes and those price rises are now starting to flow through," Riggall said of the power situation in Europe. "We'd expect a European recession to commence in the fourth quarter of this year."

High voltage power line in connection with euro coins.
Photo credit: Getty Images

Along with the looming energy shortages, inflation throughout the EU was nearing double digits.

Riggall said that would continue to impact New Zealand's rural sector. Germany, which he described as "one big car and chemical plant", was slashing fertiliser production due to the gas supply crunch - suggesting further shortages and price increases.

"It's also going to raise food prices, potentially, around the world in the next 12 to 18 months."

While that might be bad news for New Zealand consumers, our exporters could cash in.

"Potentially, as exporters of food, we could utilise those high prices and sell to high prices on the global market," said Riggall. 

"There are lots of second-order impacts going but… given the world is integrated and Europe is quite a big market, weaker economic growth in Europe will be felt globally."

Watch the video for the full interview.