Rising natural gas prices and growing uncertainty are set to shape Europe’s energy landscape this winter.
Europe’s benchmark natural gas prices are climbing, reflecting concerns over supply sufficiency and rising demand as the region enters its third winter since Russia’s invasion of Ukraine. Despite this, current gas reserves appear adequate.
Dr. Yousef Alshammari, President of the London College of Energy Economics, told Euronews Business: “Uncertainty about supply continues to dominate the markets despite sufficient reserves being available.” He noted that EU gas storage reached 90% capacity in August, ahead of schedule, and now stands at 95%, equating to over 100 billion cubic meters (bcm).
However, colder temperatures have already tested storage capacity. In early November, increased heating and electricity needs drove higher gas withdrawals.
Higher Demand Pressures Storage Levels
Colder weather in November prompted Europe to use nearly 4.3 bcm of its stored gas in just two weeks, around 4% of total storage capacity, according to Gas Infrastructure Europe data.
Dr. Alshammari predicts that by spring 2025, storage levels could drop below 50%, compared to 60% at the end of April 2024. “This winter may leave storage significantly depleted, forcing Europe to purchase more gas next year to replenish reserves. Combined with colder weather, this is likely to keep prices elevated compared to the milder previous winter.”
Risks to Energy Prices
Geopolitical tensions involving the US and Russia are adding to price volatility. “While I expect de-escalation under President-elect Trump, the current US administration’s final days seem to complicate matters, further driving volatility in oil and gas markets,” Alshammari said.
Natural gas prices reached their highest in a year last Thursday, as Gazprom halted gas flows to Austria on November 16 due to a dispute. Compounding concerns is the January 2025 expiration of a major contract allowing Russian gas transit through Ukraine, potentially removing half of Russia’s pipeline exports to the EU during peak demand.
“Further disruptions in Russian gas supplies will strain EU storage and escalate prices,” Alshammari warned. He added that supply gaps might force Europe to revert to coal and oil for power generation, with broader implications for energy markets.
Shrinking Russian gas imports and rising energy demand would also boost LNG imports, potentially pushing overall energy prices higher.
“In the long term, nuclear power should be part of Europe’s energy mix, potentially through trading nuclear-generated electricity among EU countries to reduce reliance on LNG imports,” he said.
Can Renewables Meet Europe’s Demand?
Despite declining gas consumption, renewables alone may not suffice to stabilize Europe’s energy situation. EU gas demand dropped from 350 bcm in 2022 to 295 bcm last year and fell by 3.2% in the first half of 2024, driven by expanded renewable capacity and improved energy efficiency.
“The share of renewable energy in EU electricity production rose to 44.7% in 2024, a 12.4% increase compared to 2022, while fossil fuels’ share dropped to 32.5%,” Alshammari stated. Yet he cautioned against overreliance on renewables, noting, “Some countries like Austria, Norway, and Iceland benefit from hydropower, but Europe cannot fully depend on renewables alone.”
He emphasized the importance of energy efficiency and a diversified mix. “Improved efficiency, the reintroduction of coal, and reactivating nuclear plants, as seen in Germany and France, played key roles during Europe’s 2021-2022 energy crisis,” Alshammari said. Nuclear energy accounted for 22.8% of EU electricity production in 2023.