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How Europe’s energy crisis could have a ripple effect on the U.S. and China

Markets reporter Ines Ferre looks at how Europe's energy crisis may later impact the U.S. and China's energy market demands, as Russia shuts down the Nord Stream pipeline.

Video Transcript

SEANA SMITH: Europe is in a full blown energy crisis as prices soar after a key pipeline from Russia to Germany remained shut. Ines Ferre is here to break down how Europe's energy crisis could impact not just the region, but other parts of the world as well. Ines.

INES FERRE: Yeah, Seana, and one strategist calls this an undeclared economic war between Russia and the EU. Brussels' prime minister in a media interview saying that a few more weeks of this and the European economy will come to a full stop.

You have to understand that these energy prices, compared to a year ago, are so high that energy input prices for businesses have skyrocketed for running a hotel, for running schools. Denmark recently announced that its buildings, its public buildings at night will not be lit, and that they will keep the rooms inside of those buildings at a certain temperature so as to not spend so much on energy.

Now, the impact that this will have not only on Europe, but other parts of the world, is significant because ultimately, one strategist is saying, look, if Europeans are spending so much on energy and food, they have less to spend on discretionary items. Ultimately, this will impact regions like China, which makes so many goods for exports.

As far as the US is concerned, US refiners, this puts them in a more privileged position because here in the US, for example, natural gas prices, are about 1/7 or 1/8 of what is paid in Europe. And Europe is now scrambling to try and substitute other forms of energy for natural gas. So for example, heating oil, diesel, these kinds of fuels are going to be more in demand going forward.

SEANA SMITH: All right, Ines, thanks so much for breaking that down for us.