Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Europe’s energy prices slump. Just not on your bill.

Europe’s energy prices slump. Just not on your bill.

Natural gas prices are below what they were when Russia launched its full-scale invasion of Ukraine — but it’s still too early to celebrate.

January temperatures are rising and the price of gas is falling — that's good news for Europe and bad news for Russian President Vladimir Putin.

However, those price drops are still a long way from showing up on energy bills for consumers and businesses.

Although Europe’s energy crisis is still very far from over, 2023 could hardly have started better for policymakers worried about how to keep the lights on this winter and beyond.

Exceptionally mild weather — including a record-breaking New Year’s Day in several countries ­— has further eased already falling gas demand, contributing to a drop in wholesale prices, which have now tumbled to levels not seen since before Russia’s full-scale invasion of Ukraine more than 10 months ago.

The unseasonable warmth combined with a prior, drastic cut to gas demand in Germany and other European economies saw month-ahead gas prices trading at €70.80 per megawatt-hour at the main European exchange, the Dutch TTF, on Tuesday.

Make no mistake, that’s still very expensive gas — about five times higher than in 2019, when European gas prices first started creeping up. And crucially in terms of European industry’s global competitiveness, the price still considerably higher than natural gas in the U.S.

Nevertheless, it’s around half the price seen as recently as October, and almost five times lower than last August’s record-setting peak. 


Consumer impact


Falls in the wholesale price of gas won’t immediately translate into lower utility bills for business and domestic consumers in Europe, currently struggling to cope with elevated costs despite support from a range of government subsidy schemes. 

Craig Lowrey, principal consultant at the U.K.-based Cornwall Insight energy research firm, said the falls in wholesale prices would not immediately or automatically lead to a corresponding fall in people’s bills. Energy firms, which supply gas to domestic and business consumers, buy up gas on the wholesale market well in advance. 

“There has to be a note of caution regarding what we see in the market, certainly given how fast prices previously went up in such a short space of time,” said Lowrey. “Yes, we have seen them come down and at this point in time there are potentially grounds for optimism. However, this is a very long and very rocky road for the energy market — and unfortunately for customers’ bills — for the coming months and years.”

But there is no question that wholesale markets are seeing a “significant relaxation” — partly due to this winter’s abnormally warm weather, according to Georg Zachmann, a senior fellow at the Bruegel think tank.

The construction site of the Uniper Liquefied Natural Gas terminal in Wilhelmshaven, Germany


New import capacity for seaborne liquefied natural gas (LNG) is also helping to ease prices. New terminals, including in the Netherlands and Germany, will have a combined annual capacity of almost 40 billion cubic meters (bcm) by the end of 2023 — a little under 10 percent of what the EU consumed in 2021.

Meanwhile, “significantly stronger” reduction of demand across the EU — which fell by 20 percent between August and November — also helped calm markets, Zachmann said.


Resolving storage


Gas storage levels are higher than historical trends and are even rising slightly, with EU reserves 83.5 percent full on average, compared to 54 percent at this time last year — with stocks more than 90 percent full in Germany, Poland, Croatia, Denmark, Spain and Portugal, according to Gas Infrastructure Europe.

Tom Marzec-Manser, head of gas analytics at the Independent Commodity Intelligence Services, said it was “unusual” to see net EU-wide storage levels rising in January.

“The real concern for the market has not just been getting through this winter but about how we refill and brace ourselves for the winter commencing October 2023. The concern was that if we're over-reliant on storage this winter, refilling next year would be particularly difficult,” Marzec-Manser said.

It is now “plausible” that the EU could get to the end of winter with storage facilities half-full, he added, but this would require continued mild weather, sustained LNG imports and continued gas conservation efforts from consumers. That would be a “very good result,” easing pressure on European countries in the so-called gas injection season, when storage needs to be filled during spring and summer.

The EU imported 134.8 bcm of LNG last year, up from 81 bcm in 2021, tweeted Miguel Gil Tertre, chief economist for the EU's Directorate General for Energy. That's helped replace the dramatic reduction in Russia pipeline gas, which used to supply 40 percent of the EU's demands and has now dropped to less than 10 percent.

Falling prices and slumping sales are bad news for Russia's Gazprom gas export monopoly. CEO Alexey Miller said this week that Gazprom's production fell by about a fifth in 2022 compared to 2021, and exports dropped by 45.5 percent.

But it’s far too soon to celebrate. A spring and summer scramble for scarce global LNG reserves is still likely, which could drive up prices again.

Gas demand in China, which has been suppressed by its zero-COVID policy, could surge as the country opens up and gets its economy moving, potentially tightening the market. However, a major uptick in COVID-19 cases in recent weeks has cast doubt on China’s economic trajectory this year.

German Chancellor Olaf Scholz seems to have gotten the message, urging citizens on Saturday to double down on saving energy — a task he said would “remain important in the coming months.”

Despite falling wholesale prices, the energy emergency isn't over yet.

"Is this crisis averted? Are we out of the woods? No," Marzec-Manser said.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Hungarian Prime Minister Viktor Orbán stated that Hungary will not adopt the euro because the European Union is falling apart.
Mayor in western Germany in intensive care after stabbing
Australian government pays Deloitte nearly half a million dollars for a report built on fabricated quotes, fake citations, and AI-generated nonsense.
BYD’s UK Sales Soar Nearly Nine-Fold, Making Britain Its Biggest Market Outside China
Latvia to Bar Tourist and Occasional Buses to Russia and Belarus Until 2026
Wave of Complaints Against Apple Over iPhone 17 Pro’s Scratch Sensitivity
Munich Airport Reopens After Second Drone Shutdown
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
×