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Gas prices in Europe are now lower than before Russia attacked Ukraine – partly because a lot of energy has been saved. But before the next winter, the situation could change again.
Gas prices in Europe caused great concern for months due to the widespread failure of Russian gas supplies. But since September last year there has been a turnaround: Prices on the energy exchanges have fallen significantly and are now even below the level before the start of the Russian war of aggression against Ukraine.
After a price peak in autumn 2022 of around 280 euros per megawatt hour (MWh) in the TTF contract, which is considered the benchmark for the European gas price, prices are now around 40 euros per MWh. That’s even less than in February 2022, when the Ukraine war began. European natural gas was last cheaper in August 2021.
The development of gas prices on the world market brings noticeable relief for consumers. According to the comparison portal Verivox, prices for new customers peaked last autumn at a good 40 cents per kilowatt hour (kWh). Since then, however, they have been declining and currently average 10.3 cents per kWh.
Storage compensates for fluctuations
According to experts, there are several reasons that contributed to the fall in gas prices. In particular, well-filled natural gas storage facilities played an important role, since they were able to successfully balance out fluctuations in gas consumption. The mild weather also played a role.
Savings in industry, commerce, power plants and households have also contributed to a noticeable drop in gas prices. Together, these factors led to a significant reduction in both wholesale market and end-consumer prices.
What role LNG imports play
Increased shipments of regasified liquefied natural gas (LNG) from Belgium and the Netherlands also played a crucial role in prices Ralph Solveen, deputy chief economist at Commerzbank, emphasizes.
The commissioning of the German LNG terminals also helped, but the terminals have not yet played a decisive role, according to the expert. The third terminal in Brunsbüttel has been in regular operation since April, in addition to the terminals in Wilhelmshaven and Lubmin.
“While the terminal in Wilhelmshaven is already largely utilized, there is still considerable potential for improvement at the other two terminals, particularly in Lubmin,” says Solveen.
Price brake to relieve consumers
The federal and state governments have taken measures to directly relieve consumers. The gas price brake has been in effect since March 2023, capping the gas price for private households at twelve cents per kWh.
However, this limit only applies to 80 percent of the previous year’s consumption. For the remaining consumption, customers must pay the full contract price.
Demand from China influences the world market
Despite the current easing in the gas market, there are reasons that prices could rise again in the future. “The LNG imports were also so cheap because China’s economy was weakening and with it the demand for LNG,” explains Solveen.
With the recovery of the Chinese economy, the likelihood that the demand for LNG will increase and thus the price on the world market will increase. As a result, the supply could also become scarcer.
Is less gas saved?
Another point: It is already evident that both companies and households are saving less due to the lower prices. This could lead to problems in the coming winter. On a positive note, however, the German LNG terminals still have capacity reserves and further terminals are scheduled to go into operation towards the end of the year.
“The biggest uncertainty factor is the weather,” emphasizes Solveen. With a colder winter, gas consumption increases. Without additional savings, it could then become scarce.
The lower gas prices are a relief for private consumers and companies. However, the situation on the energy market is not yet really stable.