The nationwide strike in France disrupted energy supply
The collective strikes in multiple industries in France were in protest against fiscal austerity, restricting the operation of energy facilities. The domestic gas and electricity supply was disrupted.
Budget cuts trigger nationwide strikes, energy sector becomes core protest site.
The latest round of nationwide strikes in France has officially begun, covering various fields such as electricity and natural gas. The core trigger of this protest is the new fiscal budget plan that the government is about to implement. France's economy has underperformed expectations this year and its fiscal deficit is more than 5% of GDP, far above the target.
In an effort to tighten the budget and reduce the deficit, the government is planning to introduce a package of austerity measures, including amendments to the benefits of energy industry workers. Previously, workers in this sector enjoyed exclusive discounts on electricity and gas bills. This round of reform intends to reduce or even eliminate these benefits. Besides energy workers, French fishermen and grassroots public officials have also joined the demonstrations. Fishermen have blocked fuel warehouses to protest against the high cost of fuel. The police group has taken to the streets in a march to demand an increase in salary and benefits.
The transportation capacity of LNG terminals has been halved, and nuclear power capacity has slightly declined.
The most direct impact of the strike on the French energy system is concentrated in the liquefied natural gas storage and transportation sector. The LNG terminal in Dunkirk is the largest natural gas receiving and transportation hub in the country. Due to the suspension of work by energy workers, the daily transportation capacity of this core terminal has sharply dropped to 4 gigawatt-hours. Compared with the normal operating state, the daily output gap of the terminal is as high as 476 gigawatt-hours.
The terminal transportation capacity is limited, and the existing natural gas can not be smoothly transported to the domestic and European pipelines. The European natural gas futures are highly sensitive to the regional supply bottleneck. This time, it is a structural supply shortage of "having goods but unable to deliver". This has pushed up the spot prices of natural gas in France and the surrounding areas.
A large number of employees of the EDF participated in the strike, directly causing the production capacity of eight nuclear reactors and one natural gas power generation facility to be reduced. The decline in production capacity did not lead to a power supply crisis. Even with the disruption caused by the strike, France still maintained its status as a net exporter of electricity in Europe, and its electricity exports remained stable. This also made the electricity futures market performance relatively mild, without experiencing a unilateral sharp increase.
The strike may last for a long time.
This strike is not a short-term incident. The French government, in order to improve the fiscal deficit, must cut spending. The adjustment of welfare in the energy industry is just the first step. The political parties are intensifying their games before the 2027 general election, and the controversy over budget proposals has significantly increased. Subsequently, it is highly likely to trigger a new round of union protests. As the energy industry is the core of public utilities, it will become a high-incidence area for strikes.
As long as the strike risks persist, the LNG terminals and nuclear power capacity may be subject to temporary restrictions at any time, and there will be no unilateral decline in the futures of natural gas and electricity. At present, the divergence between buyers and sellers in European energy futures is very clear. The temporary supply disruptions caused by the strike, regional circulation bottlenecks, combined with the rising market risk sentiment, give short-term prices upward elasticity. However, France has sufficient overall energy reserves, stable net electricity exports and stable overseas LNG arrivals, and there is no substantive supply-demand gap. The increase in energy prices is limited.