Europe Faces Another Gas Winter Test, But Will Russia Remain a Factor?
The chill of November brought a resurgence of anxiety to European energy markets, hinting at a potential replay of the tumultuous winter of 2022 when Russia’s invasion of Ukraine sent gas prices soaring and fears of energy shortages gripped the continent. While this year’s price spike is less severe, it has reminded Europe that its dependency on energy imports, despite major efforts to diversify, remains a vulnerability.
A cold start to November spurred increased energy demand for heating, straining supplies already impacted by low wind power output in northern Europe. Natural gas prices swiftly responded, climbing nearly 40% since mid-September and reaching €49 ($51.60) per megawatt-hour on November 21st – the highest point in over a year.
These price fluctuations have fueled reminiscences of the 2022 energy crisis when Russia weaponized its gas supplies, dramatically reducing pipeline flow to Europe and sending shockwaves through the global energy market.
"Prices have risen by approximately 40% since mid-September," acknowledged Petras Katinas, an energy analyst at the Centre for Research on Energy and Clean Air (CREA). "So it’s a pretty huge jump all of a sudden."
However, experts caution against declaring an imminent crisis. Katinas emphasized:
"I wouldn’t call it crisis, especially if we compare what actually happened in 2022 and 2023. The majority of the EU member states do not have huge dependency on Russian gas anymore."
Europe’s monumental effort to reduce reliance on Russian energy is undeniable. Pipeline gas imports from Russia plummeted from 40% of the EU’s total in 2021 to a mere 9% in 2023.
But the shadow of Russia still lingers over the European energy landscape. While pipeline gas deliveries dwindle, Russian liquefied natural gas (LNG) is filling the gap. This has increased Russia’s overall share of EU gas imports to 18%, a 5% rise from 2023.
Austria, one of the last European nations still receiving Russian pipeline gas, recently called off its arrangements with Gazprom – the state-owned Russian energy giant – following a legal dispute. Slovakia and Hungary remain connected through existing pipelines, but their uninterrupted access is not guaranteed.
A vital gas transit deal between Gazprom and Ukraine’s Naftogas allows Russian gas to flow across Ukraine to Eastern Europe. This keystone agreement, however, is set to expire at the end of 2024, and Kyiv has signaled its intention not to renew it.
Borys Dodonov, director of the Center for Energy and Climate Studies at the Kyiv School of Economics, believes Ukraine’s decision is economically sound. He noted:
"Ukraine has no economic rationale to renew this contract"
While a complete cessation of gas flow seems probable, hidden agreements or external pressure from the EU to maintain supply cannot be entirely ruled out.
Adding to the complexity, Europe continues to be Russia’s largest customer for both pipeline gas and LNG, reflecting the enduring interdependence despite geopolitical tensions. In October, the EU accounted for nearly half of Russia’s LNG exports and 40% of its pipeline gas exports.
The reliance on Russian LNG, however, could soon diminish. As European nations prioritize energy security and diversify their sources, LNG imports from the United States figure heavily in their future plans.
Ed Cox, head of global LNG at ICIS, a leading commodity data provider, predicted:
"Europe will get enough LNG if it needs it. But it might mean that European prices have to go higher to compete with Asian demand."
Cox, along with many other analysts, anticipates that unless Europe experiences an exceptionally cold winter and a parallel end to the Ukraine transit deal, the continent will manage to weather the winter.
Nevertheless, a significant price hike remains likely as LNG supplies become stretched, potentially leading to higher energy costs for European consumers and businesses in the coming years.
This delicate balancing act underscores the geopolitical complexities entwined with global energy markets. As Europe navigates the transition to a more sustainable and independent energy future, Russia’s lingering presence continues to cast a long shadow.
