Yves here. Because there’s so much wild weather now, we’ve gone light on including the severity of winter temps in the UK and Europe in our Links. But a generally cold winter with some nasty frigid spells is leading to a more-rapid-than-expected drawdown of European gas reserves.
This article treads a bit lightly on the impact of Ukraine shutting off another portion of EU gas supplies from Russia via Ukraine refusing to renew a contract with Russia at the turn of the year and Russia being unwilling to send gas with no deal. Many pointed out the obvious, that this development would increase prices, even though the European Commission barmily maintained it was so well prepared that there would be no impact. That is already proving false.
More EU self-sabotage. The contract governing the transit of Russian gas through Ukraine is set to expire today, December 31 — and Ukraine doesn’t intend to renew it. This will exacerbate Europe’s energy crisis, all to the US’s benefit.
My latest:https://t.co/DOVkwcNQLA
— Thomas Fazi (@battleforeurope) December 31, 2024
Mind you, this is not the only recent Russian pipeline gas squeeze:
🇷🇺❌🇦🇹 Russia has officially halted gas supplies to Austria, with possible cut of gas to the Czech Republic and Slovakia by the end of 2024.
Gas prices are reportedly soaring across Europe. When applying sanctions, don't bite the hand that feeds you. pic.twitter.com/CL5kLeokTs
— Spetsnaℤ 007 🇷🇺 (@Alex_Oloyede2) November 16, 2024
And gas prices have indeed been rising:
The strangulation of Europe continues
European natural gas prices are at their highest in 14 months#Natgaas #Gas #LNG #Europe https://t.co/SrbWeCZZjU pic.twitter.com/IQLzFz59xh
— Anas Alhajji (@anasalhajji) January 2, 2025
🇬🇧 Look how the tune has changed!
The Times has suddenly realized that the Ukrainian regime's cutoff of Russian gas to Eastern Europe is driving up gas prices in the UK. The newspaper expresses deep sympathy for British pensioners who, as of this winter, have lost heating… pic.twitter.com/5h9I3MCEDR
— Zlatti71 (@Zlatti_71) January 2, 2025
Alexander Mercouris last week pointed out that the Commission was actually gleeful about this act of economic self-destruction. As you can hear in the video below, starting at 4:45, the Commission has long and insistently taken the view that Russia should break up state-owned Gazprom and allow Western companies to develop gas in Russia. The justification is that Russia agreed to participate in a European Third Energy Package, which provided for the “deregulation” of energy development. In fact, Russia never ratified that treaty. The Commission has thus weirdly taken the position that if they can’t bring Russia to heel, they don’t want their energy. This recap also includes some detail about the row over Yukos.
Be careful what you wish for.
The article cheerily contends that Europe can get through this long-term crunch. But pray tell, at what cost? A big reason that an overt crisis has not occurred is what is antiseptically called demand destruction, as in industry, particularly in Germany, shuttering operations and reducing production schedules. Germany is now in the midst of what some experts depict as its longest post WWII recession. If there’s some sort of victory to be had here, it’s looking awfully Pyrrhic.
By Julianne Geiger, a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group. Originally published at OilPrice
- Europe is rapidly depleting its gas reserves due to a harsh winter and the halt of Russian gas flows via Ukraine.
- Germany faces significant economic risks due to its energy-intensive industries.
- Refilling depleted gas storage during summer will be critical in the Spring of 2025.
Ah, Europe and its perennial energy conundrums. Just when you thought it was safe to turn up the thermostat, the specter of gas shortages once again knocking on Europe’s door as it depletes its natural gas reserves at an unprecedented rate. Are fears of tough times ahead unfounded?
The Great Gas Guzzle of 2025
We’ve arrived in January 2025, and Europe is burning through its gas reserves at a pace not seen in seven years. Cold snaps have residents cranking up the heat, leading to a rapid depletion of stored natural gas. Storage levels, which were comfortably above 90% in November, have now dipped to just over 70%.
The accelerated gas drawdown, combined with the recent halt in Russian gas flows via Ukraine, has some analysts fearing the worst—disruptions.
Turning Off The Taps
On January 1, 2025, Ukraine decided not to renew its gas transit agreement with Russia, effectively stopping the flow of Russian natural gas to Europe through its pipelines.
Yes, the move is a bold geopolitical statement. So much so that it has left several Central and Eastern European countries scrambling for alternative supply. Slovakia, for one, is having to rely on gas imports from Hungary. Austria is getting more gas from Germany and Italy to compensate for the shortfall.
The Domino Effect
Unsurprisingly, the cessation of Russian gas via Ukraine has pushed prices for natural gas higher across Europe. The Dutch TTF gas hub’s front-month contract reached a ten-month high of €42.57 per megawatt-hour, reflecting market jitters. Traders are also paying a record premium for European gas for the upcoming summer, a reversal of the usual pricing trend where summer gas is cheaper. This suggests there are significant concerns about the challenges in restocking during the summer of 2025.
The German Predicament
Germany, Europe’s industrial powerhouse, is in a particularly precarious position, and the rapid depletion of its gas reserves has led to warnings that the German economy is “acutely” at risk. Because energy-intensive industries are the backbone of its economy, any prolonged energy shortage could have severe repercussions.
A Justified Panic?
Before everyone starts stockpiling wool socks and firewood, it should be noted that the European Commission, ever the voice of bureaucratic calm, has stated that there are no immediate supply security concerns. The EC has argued that European gas infrastructure is flexible and that alternative supply routes are available. Moreover, Europe’s gas storage levels, while declining, are still slightly higher than the average for this time of year—it’s just the pace at which they’ve depleted over the winter season that has caused the ruckus.
LNG Lifeline
Liquefied Natural Gas (LNG) has been Europe’s knight in shining armor. Liquefied Natural Gas (LNG) has been Europe’s knight in shining armor. It has beefed up its LNG import capacity over the last couple of years, helping it to diversity its supply sources and provide a buffer against the shocks from traditional pipeline disruptions. But increased competition for LNG, especially from Asia, could drive prices up, making the safety net a costly one.
Summer’s Role in Winter’s Woes
The real test will come during the summer months when Europe needs to refill its gas storage in preparation for the next winter. The rapid depletion of reserves this winter means that the continent will have to work harder to replenish stocks. The European Commission has already set intermediate gas storage filling targets for 2025 to ensure secure supplies and market stability.
But with the current market dynamics and geopolitical tensions, achieving these targets could end up being more challenging than in previous years.
Balancing Act
Although the situation is serious, hitting the panic button at this stage could be premature. Europe has shown resilience in the face of energy crises before, and the lessons learned from past disruptions have led to a more robust and diversified energy infrastructure.
But complacency is not an option.
Policymakers and industry stakeholders will need to navigate the coming months with a keen eye on both supply and demand, ensuring that the lights stay on across the continent. While concerns over gas supplies are not entirely overblown, they are unlikely to be insurmountable. With careful planning and some good luck, Europe should be able to weather this storm—and emerge more energy-secure on the other side.
It is bemusing to look at US obstruction of European energy supplies – JFK trying to block Druzhba Pipeline bringing oil to Germany.
Reagan in 1982 trying to block the Brastvo Pipeline bringing gas to Europe where German traded OCTG from Mannesmann for 35 year gas supply contracts on Take-or-Pay basis – that is why Nordstream was blown to claim force majeure
Then the EU forced Gazprom to sell its pipelines to separate gas supply from transport infrastructure.
USSR had 12 pipelines supplying Europe. The ones across Ukraine are 40-50 years old and in need of replacement. Russia is not going to fund this. Ukraine was paid transit fees in kind and Naftogaz a middle man was able to bilk Ukrainian consumers to fill Cyprus bank accounts for Nomenklatura in Kiev
The bigger problem is German Lunacy. Mannheim is the first city to begin dismantling gas pipelines and thus is the Green Plan – to destroy gas pipeline infrastructure completely
If Russia were not sending LNG Europe including U.K. would be in crisis. As it is Consumers are poor and XXLLutz just acquired Porta – two major furniture retailers face collapsed demand and furniture manufacturers fold like Hülstra.
The remainder items in shops are always key as us what flies off the shelves – baked beans, pasta. It shows who is hurting. The Greens intend everyone to be poor as in GDR with regulation 40m2 apartment and allocation economy. The trouble is in just 16 years in power in Baden-Württemberg they caused Merkel to exit nuclear power and turned what was the richest state with best education system into a cesspit ◽️That is Germany‘s trajectory and it cannot be reversed.
Frankly Northern Europe is no longer viable. Ever since Soviet and Libyan oil came into Europe in 1960s people started to live more prosperous lives as energy became cheap and abundant. Ever since 1973 employment became more and more dependent on credit expansion and deficit financing.
Europe has a bigger population than USA with no natural resources and no energy sources. It is hard to see how it will survive without violence and civil disorder
–severity of winter temps in the UK and Europe– What??
Mildest winter on record. Todey i have 6 degrees Celsius. Last year it was minus 10 and knee deep in snow. Winter now is more less similar to East Midlands.
I was questioning this as well. I live on the west coast of Sweden, and we had our first real snow on Monday. It had all melted by yesterday afternoon. Next week, it’s supposed to be 10 C (50 F). Who is having such a severe winter? It’s certainly not us. It makes me wonder if the “severe winter” is just a red herring, and there’s something else going on with the gas supply that they’re trying to cover up.
Ditto for Central Europe. At this point I would not be surprised if all these numbers about 90% filled storages were fake, everything was held by Putin pumping gas and letting EU to relabel it as from someone else, and now when that option is gone, the numbers need a lot of adjustment to bring them closer to reality.
Iberian peninsula the same. December showed mild and expected a relatively mild rest of the winter.
Retail NG quotes are now somehow higher than in Jan 2024 (about 10%) but still 28% lower than in Jan 2023. And January shows typically highest yearly quotes.
What you say sounds logical. So maybe the EU was not that successful in setting aside reserves last year and because of that, gas reserves are falling low rapidly. And winter still has a few more months to run its course with possible cold snaps to come.
I remember from my youth in Alberta that January & February were the absolute worst months for cold temperatures.
It’s the same for continental Europe mostly (plains). There were a few (2 – 4) weeks of below minus 10 degrees C in february last few years AFAIR.
Nice to see that others share my experience. The winter here in Germany is a bit colder than last two years but by pre climate-catastrophy standards still a mild one. I always wondered where this “cold winter” trope comes from, thats what you hear from Alexander Mersouris.
Sorry, many many commentators on this winter have said precisely that, and energy demand shows that is true. And we have links today on severely low temperatures in the UK and France. Europe does not start and end in your part of Germany.
On January 20, 1985 it was the coldest day ever for Chicago at – 27 degrees Fahrenheit (-33 C) temperature, not wind chill. The rusty 1976 Dodge Dart with the Slant Six started and ran fine that day.
Berlin like much of eastern Germany gets its winds from Scandinavia and Russia so it can be very sharp and cold in Saxony or Thuringia – it can be mild in Baden and harsh in Bavaria depending on which way the winds blow in
What is also to be considered is Nebenkostenrechnungen which have contract prices for heating and hot water and are squeezing many household budgets. The use of Spot Markets by EU Edict after 2020 and that Bankers‘ Dream TTF Exchange in Netherlands has impoverished families forced to pay Spot for what was once fixed price contracts
So the issue of storage plays right into Spot pricing for consumers
Be interesting to learn in which region you reside. You assume natural gas is burned to heat but one Margaret Thatcher switched U.K. electricity production from coal to Gas. It is cheap to build gas plants which is why Hanson dived in but the production cost is exorbitant for base-load.
As you get further north in U.K. electricity consumption for lighting increases and even Bradford has similar patterns to Aberdeen. It is not only colder as you move north and higher above sea level but darker.
I think you will find many people do not feel winter is mild nor that the months from October to April are survivable.
Its more along the lines of La Nina forecast. end of 2024 was the transition. Now it all depends on how deep La Nina goes, but whereas last El Nino winter was mild (typical), this winter will not be as mild – whether it will be a lot colder is an educated (from the coupled ocean-atmosphere models) estimate. Based on Pacific SST from satellite data, the models are good. predicting the Pacific SST, not really.
From the Brave AI
“Eu Temperatures 2025 Winter
The winter of 2024/2025 in Europe is expected to start off well, with colder temperatures in the first part of December, as indicated by the pressure anomaly over central and southwestern Europe. However, the overall winter forecast suggests a slowdown in colder temperatures, followed by a potential increase again in February.
The La Niña event, which is a cold phase of the ENSO oscillation, is expected to influence the winter weather patterns. Although La Niña does not have a direct impact on Europe, it can indirectly affect the region by shifting the jet stream and influencing pressure systems. The forecast shows a low-pressure area over the North Atlantic and northern Europe, with a high-pressure system over western, central, and southern Europe.”
I don’t think that at this stage of the winter there is any solid data, but I don’t see any evidence that this is an exceptionally cold winter for Europe (although its very cold right now in Ireland). The last two winters were very unusually warm and mild, we may just have gone back to a normal one – or what passes for normal no. November and December were generally quite mild. There is a cold snap running over western Europe at the moment, but its not a long term weather front, it looks like it will have cleared by next week. For the western fringes of Europe, its been fortunate that the weather has been in a series of fronts which has kept wind generation high, its not been a single high pressure zone which can cause enormous energy spikes. This kept overall energy prices very low up to December.
Gas storage rates of 70% at this time of the year is quite normal, although of course its not clear if this is due to demand destruction in industry. The news on Russian gas did surprisingly little to wholesale prices.
Regarding winter severity I have to agree. Here in central Poland we did get down to 23F on Saturday so I got out my coat I bought 2 years ago (and have never worn) to give it a try. It worked exceptionally well. After that, I put it back in the closet. No snow on the ground, no frozen dog bowls or chicken drip thingies to fuss with.
The wars in Ukraine and west Asia are probably going to contribute to harsh winters for three or four years after the major fighting stops, just like WW II.
It’s cold in the UK at the moment. Two inches of snow and -5ºC in the Greater Manchester area. Given the housing stock and living standard expectations here, everyone has their central heating (usually gas) on full and are using whatever ancillary heaters (woodburning stoves, electric blankets etc) they have to hand.
Based upon my perusing of the tubes the oil rags have been hyping Arctic Vortices for quite some time. I always wrote it off to increasingly wavy jet streams. We in Minnesota haven’t had a properly cold winter since 2000 or so, when xc skiing became a memory. This year, due to nonstop snow drought and continuing mild temps, in the teens, I’m biking all winter.
My current guess it’s all hype for denying climate change and an excuse for more “drill baby drill”.
These “journalists” need to get outside more, and try remembering for a change.
I gather that big players in LNG are the US, Russia, and Qatar. It’s lots more expensive that pipeline gas. Methinks the Nordsteam destruction job’s dual aim was to take out a major competitor’s distribution line and to bring EU leader, Germany, to heel.
Were the EU to compose it’s differences with Russia, the LNG vendors would suffer seriously. Were Germany to overthrow its vassalage to the US and take the lead eastward, other EU countries would soon follow. But, then, there’re the US occupation forces . . ..
When you have a 35-year Take-or-Pay contract you wish to welch on without being sued to insolvency you need Force Majeure
Ie You burn the factory/ torch the warehouse/ blow up the pipeline/ go to war
Just look at the 10 year history available here. They’re shown in terms of price per MWh, but you can still clearly see that the current prices are at least 300% above where they were prior to 2020. I don’t know many societies that can absorb an increase of that magnitude in price for such an essential input to an economy and survive.