Gas prices are rising in Europe

Turbulent outlook for the coming year, as the EU is still dependent on deliveries from Russia

Growing concerns about Europe’s reliance on gas supplies from Russia has led to fears of persistent price volatility in the international energy market.

On Tuesday, the 15th day in a row, a pipeline that normally carries gas from Siberia to Europe diverted flows from Germany to Poland, with supplies from Ukraine to Slovakia also being less than usual.

This resulted in a 30 percent increase in European gas prices and against a backdrop of ongoing tensions between Russia and European countries over its intentions towards its neighbor Ukraine.

More than 40 percent of the natural gas used in the European Union comes from Russia and it has been claimed that Russia uses this as a leverage tool.

Recent data from Gas Infrastructure Europe showed that despite some top-ups over the Christmas season when milder than usual weather cut demand, the most recent reading of European gas storage facilities was only 56.3 percent full, more than 15 percentage points below the 10-year figure. Average.

“In none of the last years since records began, we had comparably low storage levels at this point in time,” said Sebastian Bleschke, head of the German gas and hydrogen storage operator, the Bloomberg news agency.

The Russian energy company Gazprom has reduced its daily gas transit via Ukraine to Europe with around 50 million cubic meters to the lowest level since January 2020.

“The energy crisis hit the bloc when security of supply was not on the menu of EU politicians,” Maximo Miccinilli, head of energy and climate at the consultancy FleishmanHillard EU, told Bloomberg.

Due to its own natural gas resources, which have been declining for years, Europe has for a long time been increasingly dependent on imports, especially from Russia.

The newly completed Nord Stream 2, an $ 11 billion, 1,230-kilometer pipeline that runs under the Baltic Sea from Russia to Germany, could make a big difference, but has been ravaged by political arguments during its decades of construction.

The US government has fought the construction with sanctions for years, and despite the completion now being completed, it is facing another obstacle in the form of the new German coalition government, which, together with the country’s energy regulator, does not yet have to do justice to the project for final approval, which only made prices soar.

Russian President Vladimir Putin stressed in a televised address shortly before Christmas how much approval would defuse the situation. “The additional quantities of gas on the European market would undoubtedly lower the local price”.

Massimo Di-Odoardo, vice president of gas and liquefied natural gas research at consultancy Wood Mackenzie, said the outlook for European prices in 2022 remains turbulent.

“It’s hard to see how decent gas storage can be achieved without additional Russian exports via Nord Stream 2 or existing routes,” he added.