Europe’s homes and businesses are set to face a difficult winter because of record natural gas prices

“High gas prices today are a problem for Europe,” Enel says European gas reached a record this year, power also surged

European energy executives warned of a difficult winter ahead as natural gas prices soar to records, a grim prospect for households and businesses recovering from the global pandemic.

Gas prices in Europe are breaking records day after day as economies reopen and people return to the office, boosting demand just as supplies are falling short. That’s fueling inflation and boosting concerns energy-intensive industries from fertilizers to steel and even food makers will need to slow down.

Prices are rallying even though it’s summer, when demand is usually low. That’s because a long winter left gas storage sites across Europe depleted, with inventories currently at their lowest level for this time of year in more than a decade. Austria’s energy company OMV AG said it’s still trying to catch up from last year’s deep chill.

“We’ve been running behind the storage delay all summer,” CEO Alfred Stern said late Thursday at a briefing in Vienna. “It will now depend on how cold this winter is.”

Soaring energy prices have already sent German inflation to its highest since 2008. Prices soared 3.4% in August, higher than the 2% rate the European Central Bank is targeting for the euro area. Things could still get worse as electricity prices are now at the highest since 2008 and just about 50 euro cents shy of a record.

Europe is struggling to get the extra gas it needs to refill storage sites as top supplier Russia is facing a crunch of its own, holding back additional deliveries. Outages in the North Sea are disrupting the continent’s own production just as cargoes of liquefied natural gas are being diverted to meet Asian demand.

Soaring gas prices are likely to become a problem for Asia too, Starace said.

The rally also poses a threat to companies banking on gas as a bridge fuel to the transition to low-carbon energy sources, he said. The gains have also helped drive the price of pollution permits in Europe to a record, a move meant to discourage companies from burning more coal.

“Price of gas today is somehow related to CO2 prices, so gas companies, rather than electricity companies, have to be realistic” about the role of gas in the energy transition, he said.

Europe may get some relief later this year if the controversial Nord Stream 2 pipeline from Russia to Germany starts. The current crunch shows why such infrastructure projects are critical, said Stern, whose company helped finance the link.

Russian Energy Minister Nikolay Shulginov said Thursday it’s possible that Nord Stream 2 will start sending more gas to Europe soon as the pipeline is almost complete.

— With assistance by Francine Lacqua

About Stu Turley 4118 Articles
Stuart Turley is President and CEO of Sandstone Group, a top energy data, and finance consultancy working with companies all throughout the energy value chain. Sandstone helps both small and large-cap energy companies to develop customized applications and manage data workflows/integration throughout the entire business. With experience implementing enterprise networks, supercomputers, and cellular tower solutions, Sandstone has become a trusted source and advisor.   He is also the Executive Publisher of www.energynewsbeat.com, the best source for 24/7 energy news coverage, and is the Co-Host of the energy news video and Podcast Energy News Beat. Energy should be used to elevate humanity out of poverty. Let's use all forms of energy with the least impact on the environment while being sustainable without printing money. Stu is also a co-host on the 3 Podcasters Walk into A Bar podcast with David Blackmon, and Rey Trevino. Stuart is guided by over 30 years of business management experience, having successfully built and help sell multiple small and medium businesses while consulting for numerous Fortune 500 companies. He holds a B.A in Business Administration from Oklahoma State and an MBA from Oklahoma City University.