Rising Natural Gas Prices and Uncertainty to Shape Europe’s Winter Energy Outlook
Natural gas prices in Europe are climbing, reflecting concerns over supply adequacy and rising demand as the continent braces for its third winter since Russia’s invasion of Ukraine. Despite these challenges, gas reserves appear secure for now.
Dr. Yousef Alshammari, President of the London College of Energy Economics, told Euronews Business, “Uncertainty over supply continues to dominate markets, even with sufficient gas reserves available.” He noted that EU gas storage reached 90% capacity in August—well ahead of schedule—and currently stands at 95%, equivalent to over 100 billion cubic meters.
Early Signs of Strain on Reserves
Colder weather in early November has already tested storage levels. According to Gas Infrastructure Europe, withdrawals accounted for nearly 4% (4.29 bcm) of Europe’s gas storage in the first two weeks of the month. Alshammari expects storage levels to be lower by spring 2025 compared to April 2024, when reserves were at 60% capacity. “This winter, levels could dip below 50%, meaning Europe will need to procure significantly more gas next year to refill storage. Combined with colder weather, this will likely keep prices elevated compared to the relatively mild previous winter,” he said.
Geopolitical Tensions and Supply Risks
Geopolitical tensions involving the US and Russia remain a major driver of price volatility. Alshammari expressed hope for de-escalation under President-elect Trump but warned that actions by the outgoing US administration could complicate the situation further. Natural gas prices hit their highest level in a year after Russia’s Gazprom halted gas supplies to Austria on November 16, citing a bilateral dispute.
Compounding the issue, a key transit contract for Russian gas via Ukraine expires on January 1, 2025. This could eliminate half of Russia’s remaining pipeline gas exports to the EU, straining supplies during peak winter demand. “Further disruption in Russian gas would pressure EU storage and likely drive prices higher,” said Alshammari. He also warned that a decline in Russian pipeline gas could force a temporary shift back to coal and oil for power generation, exacerbating energy market instability.
Shrinking Russian imports, coupled with higher demand, would boost Europe’s reliance on LNG imports, potentially driving overall energy costs higher. Alshammari suggested nuclear energy might play a larger role in the long term, potentially through EU-wide trading of nuclear-generated power to reduce reliance on foreign LNG.
The Role of Renewables in Europe’s Energy Mix
While gas demand has fallen—dropping from 350 bcm in 2022 to 295 bcm by last year—renewable energy and efficiency measures have contributed to this decline. EU gas consumption decreased by 3.2% in the first half of 2024 compared to the same period in 2023, according to the Institute for Energy Economics and Financial Analysis.
Renewable energy accounted for 44.7% of EU electricity production in 2024, up 12.4% from 2022, while fossil fuels fell to 32.5%, a decrease of 19.7%. Despite these gains, Alshammari cautioned against over-reliance on renewables. “Countries like Austria, Norway, and Iceland, with substantial hydropower resources, are better positioned to avoid significant price spikes. However, Europe cannot depend entirely on renewables,” he said.
He emphasized the importance of energy efficiency and diversification. “In 2021 and 2022, energy efficiency improvements—particularly in Germany—helped mitigate the crisis. The revival of coal and the reactivation of nuclear plants in France also played a crucial role,” Alshammari said. Nuclear energy’s share rose to 22.8% of EU energy production in 2023, highlighting its potential as part of a balanced energy strategy.