Europe faces winter with full gas stores, global worries

As the coldest months of the year approach in the northern hemisphere, Western European citizens are again reaching for their wallets and dreading high heating bills. Though Europeans do not have to fear gas shortages this winter, heating prices will likely continue straining average earners’ finances. 

Following Russia’s February 2022 invasion of Ukraine, a disturbing reality confronted Western European nations: a major supplier of the natural gas used to power industrial facilities and heat homes was no longer a desirable trade partner. As uncertainty abounded over the impact of the beginning full-scale war on gas supplies, nations like Germany, which had spent years building trade relationships and pipelines with Russia, began making 180-degree turns in energy strategy. 

With the Nord Stream I and II pipelines knocked offline by four explosions in September 2022 and other means of importing gas from Russia voluntarily abandoned, Europe turned to the United States, Qatar, and Australia as liquified natural gas (LNG) suppliers. Six terminals for the importation of LNG have been constructed and one expanded since Russia’s invasion.

While an increase in LNG imports helped alleviate initial supply concerns, it was not the only factor in avoiding feared power cuts and major economic damage in winter 2022. Experts cite milder weather, fuel switching to cheaper energy sources, and behavioral changes on the part of consumers and industrial producers priced out of the market as driving factors behind Europe’s lucky winter. 

Last year’s milder winter, which necessitated a smaller-than-expected drawdown of Europe’s natural gas stores, and a June 2022 EU regulation requiring an annual 90% fill-by target of 1 November saw that target reached in August this year. As of 5 November, EU storage levels hover at 99.5% full. 

While ample stores have been amassed in preparation for winter, a series of recent happenings have accompanied an increase in energy prices in Europe, with market prices rising 28% in October. Though oil prices have not yet been drastically affected by the conflict between Israel and Hamas, Hamas’ 7 October attack led market giant Chevron to freeze its Tamar natural gas field, located off Israel’s coast. The closure of this field, which provides gas to Egypt and Jordan and indirectly supplies Europe with LNG through Egyptian processing, has raised analysts’ fears of a dropoff or cessation of Egyptian LNG exports this winter. 

In a throwback to last year, a Baltic Sea gas pipeline linking Finland to the European gas network was damaged in early October, sending European gas markets surging to their highest price in six months. Though Finnish investigators now believe a Chinese container vessel damaged the pipeline with a dragging anchor, the incident demonstrated how Europe’s gas markets lie on a hair trigger. NATO patrols through the Baltic Sea have increased as inquiries into whether or not the damage was intentional continue.

While prices for European energy remain roughly €100 lower per megawatt hour than they were at this time last year, such events keep high energy bills on Europeans’ list of worries this fall. Some analysts predict residential and industrial consumption to remain “quite muted” due to high prices discouraging energy-intensive production of steel and chemicals and encouraging lower thermostat settings. 

Though high storage levels and persistent lower demand work in Europe’s favor this fall, Europeans should expect to again empty their pockets on energy bills if the conflict in Gaza expands. Israel’s ground invasion has yet to draw other actors into substantive open combat, with Lebanese Hezbollah continuing small-scale attacks to tie up Israeli troops along the northern border. If this group, described by the Wilson Center as the “most formidable non-state military actor in the Middle East,” expands its involvement in hostilities or the war becomes regional through other means, world energy prices will likely spike as exports from the oil-rich region are endangered. 

A Middle East again embroiled in war, further damage to vulnerable undersea pipelines, or a bitterly cold winter all hold the potential to bring returned worry to European gas supply and consumption. And, as Europe watchers have seen this year, energy prices retain the potential to spark culture-war-type conflict within Western European societies; the Gebäudeenergiegesetz (Building Energy Act) divided German society and government for months. The interplay between current red-hot geopolitical tensions and the European gas market will remain a topic of interest as temperatures fall.