Many people wonder what all the fuss is about in terms of reduced flows and loss of Russian gas through Nord Stream and other pipelines; Here’s a simplified primer on why Germany and much of the eurozone are facing a difficult winter and a frightening future.

Natural gas markets are very simple. They are closed systems in nature and apply the laws of physics: the gas must be in a closed system from the wellhead where it is produced to the burner tip where it is consumed. Generally, gas is extracted from the ground or the sea and sent through pipelines away from production fields to where it is consumed in cities and towns by industries and households alike.

Most of the gas is produced and used in the same general geographical locations, that is, on the same continents or adjacent continents connected by land and undersea pipelines, because the gas must travel in a closed system. The exception to these geographic limitations is when gas is liquefied (by exposing it to frigid temperatures) and shipped via large tankers traveling across oceans around the world. The more replaceable nature of LNG, or LNG as it is commonly called, brings LNG closer to crude oil in terms of the ability of producers and users to trade with each other over very long distances. But the frigid temperature required to maintain gas liquefaction requires highly specialized infrastructure, equipment, and tankers; They are all in limited supply, take longer construction times, and are more difficult to maintain than regular gas pipeline transmission systems.

And here things get tricky: the overall average demand for natural gas in the winter is Larger of the total rate of production from natural gas wells. Fortunately, the opposite is true in summer. This is when the overall rate of gas demand less of the total rate of production from natural gas wells. The solution to this seasonal imbalance between supply and demand is to take the excess production of natural gas in the summer and put it into storage; When winter sets in and gas demand exceeds production, this imbalance is met by taking the gas out of storage. The system of injecting gas into storage in times of excess supply (summer) and withdrawing gas from storage during times of high demand (winter) is what makes the natural gas markets in every region of the world operate efficiently. An impressive visual picture of how this process works in the United States is updated weekly by the US Energy Information Administration in its weekly Natural Gas Storage Report.

European gas markets are no different from those in the United States or elsewhere, they necessarily adhere to the summer injection season when gas is added to stocks and to winter when gas is withdrawn from stocks.

The system works much like the holiday savings account programs run by savings banks. Workers automatically set aside money from each paycheck throughout the year so that they can spend on vacations at the end of the year by withdrawing money from their savings account when their paycheck doesn’t provide enough during times of high vacation spending needs. Everything works fine unless the worker loses his job. In this scenario, the dual-source finance that the consumer relies on suddenly becomes finance from a single source, which at best hampers holiday spending plans and at worst leaves the consumer struggling just to get the basic necessities of daily life; Vacation just doesn’t happen.

In this regard, it appears that Germany and the rest of Europe have “saved” enough gas during the summer injection period to reach, by many estimates, between eighty and ninety-five percent of capacity in their natural gas storage facilities. Politicians and public officials assure their citizens that these levels of storage will save them during the winter. But while the accounts of natural gas savings in Germany and Europe are almost completely funded, it would be unwise to ignore the fact that they lost their salaries, that is, natural gas flows through pipelines from Russia.

Officials are scrambling to secure other sources of energy to make up for the lost flow of Russian gas. LNG, diesel fuel, coal and even wood are currently available fuel sources, but they will not be enough. Think of them as part-time jobs that an unemployed person can take during vacations to mitigate the negative effects of losing their fixed salary; Between their savings account and their part-time job, they may be able to save some, but not all, of their vacation spending. They covered their basic needs (think gas for heating, home cooking, healthcare facilities, emergency services) and maybe some of their extra spending for vacations (think gas for small businesses, offices, and light industries); This is the reality of the energy situation in Europe today, if the winters were not severe.

Looking into the future, things get a lot worse. Typically, gas storage facilities reach their lowest levels right at the end of winter, but this assumes a steady supply of gas through pipelines throughout the winter, which will not happen in Europe this year. This means that Europe will run out of stored gas supplies sometime in the middle of winter, if the weather is not unusually cold and if conservation measures and alternative fuel supplies are adequate. None of this is certain or even reliably predictable at the moment.

What can be predicted is that Europe will run out of stored gas this winter earlier than most authorities publicly admit. Most of all, Europe will not be able to adequately refill its gas storage facilities next summer, which means that next winter could prove to be an economic and humanitarian disaster.

Alas, the harsh reality today is that this winter will be harsh, but one year from now, Europe may face the equivalent of an unemployed consumer with barely enough savings for basic necessities and nothing more.