Indexbit Exchange:Facing an energy crisis, Germans stock up on candles

It's a great time to be Indexbit Exchangea candlemaker in Germany.

"Candle demand is very strong right now," says Stefan Thomann, Technical Director of the European Candle Manufacturers Association.

The candle boom began during the pandemic, after the government imposed lockdowns and Germans began spending a lot more time at home. The industry expected the boom to end once the nation opened back up, Thomann says. "But then the war (in Ukraine) started."

Prior to Russia's invasion, Germany was getting more than half of its natural gas from Russia. It was Russia's biggest natural gas customer in the European Union, and many Germans used this gas to heat their homes, generate electricity, and power their factories.

After the war started, though, Germany began reducing its imports of Russian natural gas. But the German economy was pretty dependent on Russian gas, and politicians were reluctant to completely cut off the flow.

However, this summer, Russia cut gas flows to Germany, claiming a major gas pipeline in the Baltic Sea needed maintenance work. Then, in September, parts of that same pipeline mysteriously exploded. Officials are still debating how and why that happened. Whatever the reason, the spigot of Russian gas into Germany has now been shut off almost completely.

Germany is now on a mission to transform its energy economy and reduce its gas consumption. The nation is making real progress on that front. But our sources make clear that many Germans remain anxious about high energy prices and the possibility of shortages and power outages. Their response to this has included — apparently — buying lots of candles.

Germany Reshuffles Its Energy Supply

"The fear was, at the beginning of the year, that this kind of reduction in gas consumption would lead to, I think some people used the word 'meltdown,' of German industry," says Guntram Wolff, director and CEO of the German Council on Foreign Relations.

The German government has been working to reduce gas consumption and diversify its energy supply. Early this fall, it enacted new measures aimed at reducing gas demand and helping Germany make it through the winter, when power use is higher. Germans are now being encouraged to do things like use less hot water; switch off the lights on advertising billboards past 10pm, and on public monuments; turn off the heat in private swimming pools; and lower the temperature in many public buildings.

"There's regulation for all public buildings. You don't heat the floors anymore, lecture halls and so on," says Moritz Kuhn, an economics professor at the University of Bonn. His university even handed out thermostats to professors to monitor the temperature of their offices. Kuhn gets to keep his office's temperature at 19 degrees Celsius, or 66.2 degrees Fahrenheit — the maximum temperature that offices are now allowed to be heated.

In a study published earlier this year, Kuhn and his colleagues analyzed Germany's natural gas economy. They concluded that, if the nation could reduce its gas demand by about 20% and successfully shift where its natural gas came from, the country could probably make it through this winter without major power outages.

And that's exactly what Germany has been working to do. Instead of getting gas from Russia, Germany is now getting gas from places like the Netherlands, Norway, Belgium, Qatar and the United States. And it's building new infrastructure to increase the flow of natural gas from these and other non-Russian sources.

Germany has also worked to diversify its energy consumption away from natural gas. Germans are increasingly turning to solar energy. It's also resorted to using more coal to offset its reduced imports of natural gas.

Despite concerted efforts to reduce gas demand and to boost and diversify energy supply, the price of natural gas in Germany quadrupled by September, compared to the year prior. Prices have fallen a bit since then, but they're still much more expensive than they were before the war started. While Germany has tapped new sources of gas, this gas costs more, both because of reduced supply and because it costs more to transport.

German Chancellor Olaf Scholz has assured Germans that they will have enough power to make it through the winter. Germany's reserves of natural gas remain near 100%, which should be enough to last for at least the next two and a half months, says Ben Moll, an economist at the London School of Economics.

But, Moll adds, there is still reason for Germans to be concerned. "Gas storage is like your phone battery," Moll says. Think of the lack of Russian gas as like...forgetting your phone charger on a trip. "You wouldn't get excited about the fact that your phone battery is charged a hundred percent because you still know that it's only gonna last you for a day."

The Candle Boom

In the aftermath of the geopolitical clash with Russia, a sense of energy insecurity has pervaded Germany. Energy prices have skyrocketed. And because, in Germany, natural gas is used to generate electricity, fear of power outages has grown, too.

The German government says large-scale power outages are unlikely, but it's still encouraging people to be prepared. This fall, the Federal Ministry for Economics and Climate Protection put out public service announcements about how people can conserve energy. The German Office of Civil Protection and Disaster Assistance has also issued guidance about how to prepare for a power outage — including by wearing lots of warm clothing, keeping flashlights and camping or outdoor lamps around, as well as plenty of batteries...and candles.

In addition to candles, demand for mobile heaters has surged, and Germany's utilities agency has warned against overusing them, for fear of maxing out the power grid.

Moritz Kuhn, the economist from the University of Bonn, says his friends and family have been trying to buy firewood to heat their apartments, but it's nowhere to be found. "If you go to a store and try to buy anything that you could burn in your oven, you are not going to find anything. It's just all sold out or has ridiculous prices," he says.

All this said, the economists we spoke to told us that Germany is successfully transitioning away from Russian energy. Guntram Wolff, from the German Council on Foreign Relations, says the "meltdown" many feared at the beginning of the year hasn't happened.

Looking forward, Germany hopes to make the leap to 100% renewable energy by 2035. "In the end, where we are going is exactly where we wanted to go," Kuhn says. "It's just like we fast-forwarded the transition a little bit."