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Europe is not prepared for winter and risks ending up in an energy crisis like in 2022, when Russia invaded Ukraine at the height of the Kremlin's gas war with the EU. A month before the heating season, gas reserves in underground storage facilities are at a record low level over the past 15 years, and only a miracle - a warm winter or the end of the war in Iran - will keep prices for electricity and heat from further rising, and Europe from a crisis, experts say.
They haven't started heating yet, it's warm outside, and prices are already more than twice as high as last year. Gas in Europe was only more expensive in the vindictive autumn of 2022, after Russia turned off the main gas pipeline to Europe, Nord Stream, under the pretext of repairs. Since then, the EU's dependence on Russian gas has fallen from almost 50% to 12%, and all 27 countries in the union intend to phase it out completely next year.
The Kremlin has almost no leverage left over gas pressure on Europe. However, another misfortune came: the blockade of the Strait of Hormuz deprived the world market of Qatari liquefied gas. And even though Europe almost does not buy gas from Qatar, world prices have risen, and therefore European companies were in no hurry to buy expensive gas and pump it into storage facilities for the winter.
As a result, they were only 70% full by the beginning of October. In the crisis year of 2022, at this time it was almost 90%, and in subsequent years, sometimes even more.
“Winter in Europe will be very difficult. We can only hope that it will not be severe,” admitted European Commissioner for Energy Dan Jorgensen.
“But hope is a bad strategy,” he said ahead of a meeting of EU energy ministers this week, urging them to act.
The European Union has reduced the requirements for storage capacity by November 1 to 80% from 90%, but even for this the Europeans will have to speed up. At the current rate of injection, storage facilities will be 74% full by the start of the heating season, according to the latest estimates from S&P Global analysts.
This is about 78 billion cubic meters, or about a quarter of the average gas consumption in the EU in winter, which accounts for 70-80% of total annual gas demand.
Are there enough supplies for the winter?
There is no reason to panic, says the coordination group, specially created by the EU countries and the European Commission to monitor the situation on the gas market. At its last meeting in late September, it concluded that “despite low stocks in storage, supplies are stable.”
This may be so, but we cannot rest assured, experts warn.
At the current rate of consumption and prices, Europe will embark on serious expenses, which will further undermine its financial condition and reduce the income of the population and business. And a shortage of supplies during the peak of cold weather will hit not only Europeans, but also the whole world, because outside of the United States and China, only Europe has large-scale storage facilities that can compensate for a sharp jump in winter demand without a jump in gas prices to sky-high levels.
Europe burns gas and produces electricity from it. Therefore, in severe frosts, demand increases sharply, as well as in gloomy calms (the so-called Dunkelflaute), when it is cloudy and windless, as a result of which the production of solar panels and wind turbines is reduced. That’s when storage facilities are needed—there is no other way to dramatically increase gas supplies to consumers.
“This is why we are so dependent on supplies in the winter. That’s why they’re essential,” said Jack Sharples from the Oxford Institute for Energy Studies (OIES).
The 78 billion cubic meters of reserves expected by November 1 will be enough if the winter is as mild as in 2022/23 and 2023/24, when the EU burned 40-45 billion cubic meters from storage, Sharples said.
But repeat the scenario of the last two winters - and now problems are evident.
The winter before last, the EU pumped out 66 billion cubic meters, last winter - almost 60 billion. At this rate of consumption of reserves, the storage facilities will be practically empty by the end of the heating season. However, another unpleasant thing will happen first.
“Before the gauge goes down to zero in some countries, I'm sure prices in Europe will rise very high and very rapidly, especially if Hormuz never fully opens,” he said.
There will be enough gas, but money is not a fact
Therefore, the main risk this winter is expensive gas, and not the lack of it, the Oxford expert is sure. Europe is a rich continent, it did not freeze in 2022, and it will not freeze now. Another thing is how much it will cost.
After all, if reserves drop to critical levels by spring, Europe will need much more gas than usual to replenish them to the agreed upon 90% by the next heating season. Namely, about 30 billion cubic meters from May to November, according to calculations by Mike Fulwood from OIES.
In any other situation, such additional demand would result in high prices, but we are lucky - next year a large-scale increase in supplies of liquefied gas to the world market from America, Australia and Africa is expected.
But even these additional volumes will not exceed 30 billion cubic meters in six months. This is exactly what Europe needs. And if it buys up all that liquefied gas, prices will rise as global demand for gas increases with economic growth, despite supply disruptions and attempts to replace it with other energy sources.
Europe cannot afford a second summer of high prices, warns European Commissioner Dan Jorgensen.
“The energy crisis in Europe is not over, that’s obvious,” he said. — Since the start of the Iranian war, the EU's additional costs for importing fossil fuels have already exceeded 100 billion euros. For the same amount of energy."
This cannot continue, he is sure. Europe already pays three times more for gas than the United States, and more than Asia, as a result of which it loses competitiveness and is forced to spend money that could be spent on something useful.
“The situation is undoubtedly difficult. The current price level cannot be allowed to become the new normal,” the European Commissioner said.
What can be done?
One option is to sharply increase gas purchases before the start of the heating season. But - nowhere.
Hormuz is covered, and Qatar has just begun to carefully export liquefied gas in small quantities, but clearly does not count on stability of supplies, since it has just extended force majeure - the right to violate contracts due to insurmountable circumstances. Even if the war in Iran ends immediately, restoring supplies from the Persian Gulf will take time and will have no impact on stock levels in Europe this winter.
The EU's two main suppliers, the USA and Norway, are already pumping at full capacity. So it’s not yet possible to buy more gas without overpaying.
Another option is to reduce your consumption.
“European Commissioner Jorgensen finally proposed that EU countries at least slightly reduce gas and electricity consumption. It’s long overdue, I’ve been saying this for six months now,” said Anne-Sophie Corbeau of the Center for Global Energy Policy at Columbia University in the US. — Politicians love to discuss the stability of gas supplies. But no one wants to talk about saving money - it’s bad for ratings.”
Nevertheless, it is worth preparing for a crisis in advance, and not hushing it up, says Anne-Sophie Corbeau and shares her doubts: “Politicians in Europe do not know how to act proactively. It was exactly the same story in 2022.”
Victory in that gas war gave Europeans confidence bordering on carelessness, agrees Corbo's colleague from Columbia University Tatyana Mitrova. In the end, they decided to do nothing, despite all the signs of an impending crisis in the coming winter.
“European politicians have relaxed and completely missed the moment. We thought that since we survived the crisis of 2022, it means we will survive this one too. I think this is a mistake."
But what else can be done short of reducing consumption and counting on the resumption of supplies through the Strait of Hormuz?
There is one trump card in reserve - Russia.
Will Russian gas return to Europe?
In 2022, Putin put his own conditions on saving Europe from freezing. He, among other things, demanded to pay for gas in rubles - and immediately lost the majority of customers.
"Putin may well take a similar position now: 'We offered Europe gas, it refused. And now, in the middle of winter, it is asking for supplies. It's too late. Figure it out yourself,'" Mitrova said. “Otherwise he will demand concessions in support of Ukraine in return.”
