Now that European countries are no longer hoarding natural gas supplies, prices have already halved.
Germany, Europe’s largest economy, built its energy security around cheap, plentiful imports of natural gas from Russia, a losing bet after the invasion of Ukraine. Moscow has since turned off the taps to Germany, forcing a mad scramble to weatherproof itself for colder temperatures ahead.
While its policy mistake has helped disrupt supply and demand curves across the world, driving up prices since July, the good news is its hoarding may have peaked. This should help alleviate some of the pressure on global prices that caused a sharp spike over the summer, when European officials were willing to outbid the rest of the world to acquire supplies.
The country’s storage caverns, which equate to roughly three months of demand, are now nearly bursting. Capacity utilization runs just shy of the 95 percent target well before the government’s self-imposed 1 November deadline.
“It now looks as though the bloc will get through the coming winter with enough supplies - but only just - buoyed up by the gas reserves it raced to accumulate over the summer,” says a Deutsche Bank report.
Together with other European Union member states’ conservation efforts, the bloc appears to be as resilient as it can be for the colder months lying ahead. Overall storage levels for the European single market have already surpassed the EU’s November target of 80 percent, according to official data.
European benchmark prices for natural gas have already come down substantially to just €160 per megawatt-hour last week, after peaking at around €350 per MWh in late August, when the continent was busy squirreling away as much of the critical raw material as possible.
Adding a further measure of relief to prices is EU Commissioner Kadri Simson’s news that the EU has so far achieved a voluntary reduction in gas consumption of 10 percent without resorting to rationing.