European natural gas prices have surged by 30% in the past month. The sharp rise is due to colder weather, low storage levels, and weak renewable energy output. Experts are now questioning if Europe can rebuild its reserves before the next winter season.
Gas Prices Hit Two-Year High
Natural gas futures on the Dutch TTF market jumped to €59 per megawatt-hour. This is the highest level seen in two years. The increase comes as colder temperatures drive up demand. With reserves running low, energy costs are expected to stay high.
Many European countries have seen faster-than-expected gas consumption. Storage sites, which were full at the start of winter, are now quickly being depleted. The drop in reserves raises concerns about energy security for the rest of the year.
Countries Struggle With Low Reserves
France currently has the lowest gas storage in the European Union at just 29.85% capacity. Other countries, such as the UK and Ukraine, have even less, holding 25.73% and 9.33%, respectively. These numbers highlight the urgent need to secure more gas before winter returns.
If storage levels remain low, energy prices could continue to climb. Households and businesses would then face higher heating costs. Industries that rely on gas, such as manufacturing and chemicals, could also see rising expenses.
Germany Considers Subsidies to Rebuild Reserves
Germany is now looking at ways to encourage gas storage refilling. The country’s gas market operator, Trading Hub Europe GmbH (THE), is in talks with policymakers about potential financial incentives. Bloomberg reports that subsidies may help gas suppliers rebuild storage faster.
Meanwhile, the European Commission is considering an extension of strict storage rules. After Russia reduced gas exports in 2022, the EU introduced a target requiring reserves to reach 90% capacity by November. If the policy remains in place, suppliers will need to act quickly to restock gas before the deadline.
Renewable Energy Output Fails to Meet Demand
Another factor pushing gas prices higher is weak renewable energy output. Wind and solar power generation have not performed as expected. Several European countries rely on these sources, but cloudy skies and weak winds have limited electricity production.
When renewables fail to meet demand, natural gas fills the gap. This leads to more gas consumption, further reducing storage levels. Energy experts warn that if renewable output does not improve, gas prices may rise even more.
Russian Gas Shipments: A Possible Game Changer?
Despite cutting ties with Russian gas, the EU still receives some shipments. Pipelines through Ukraine continue to deliver limited amounts to Europe. However, a potential peace agreement between Russia and Ukraine could change the situation.
If the conflict ends and gas flows increase, analysts predict prices could drop by as much as 56%. But if supply restrictions remain, the impact on prices would be much smaller. Some estimates suggest a price drop of only 17% by 2026 under current conditions.
Energy Security Remains a Major Concern
The future of European energy security remains uncertain. Prices are affected by various factors, including weather conditions, liquefied natural gas (LNG) imports, and government policies. With no clear solution in sight, European households and businesses must prepare for continued volatility in the energy market.
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