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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Europe’s Energy Crisis Is Just Getting Started

  • While Europe managed to fill its gas storage ahead of winter this year, it will have to import huge amounts of LNG in a competitive market to survive next winter.
  • The next 12 to 24 months will be critical in establishing whether Europe can stave off a long-term energy crisis.
  • According to the IEA, if Russian gas supply drops to zero and Chinese LNG demand hits 2021 levels, the EU could have a supply-demand gap of 27 billion cubic meters in 2023.

Despite successfully filling its gas storage ahead of winter this year, Europe’s energy crisis is far from over. The situation for Europe could, in fact, be worse next winter when Russian pipeline gas supply will be down to a trickle, at best.

European households and businesses have already seen a rise in total energy costs by $1.06 trillion (1 trillion euros), according to estimates by European economic think-tank Bruegel published by the International Monetary Fund (IMF). According to Bruegel’s analysts, if governments in Europe do nothing except offer financial support, and if they cover the price increases, this sum would represent a massive 6% of the annual GDP of the EU.

“Massive government support could delay adjustment to a new price equilibrium and create the need for even more support,” Bruegel’s experts say.

Instead, the EU needs a “grand bargain” to encourage savings and increase supply at the same time.

The next 12 to 24 months will determine whether Europe will be able to cope with the energy crisis without having to resort to mandatory rationing or without losing too much industry competitiveness.

Europe’s energy systems were already put to the first real test this month amid an Arctic blast that swept through most of northwestern Europe, bringing freezing temperatures, snow in the UK, and depressing wind speeds in Germany.

Natural gas storage sites in the EU started to drain, with storage at 84% as of December 17, according to Gas Infrastructure Europe. Inventories are higher than at this time last year, but the true test for Europe will come next year when it will have to refill gas storage sites adequately enough to meet the 2023/2024 winter demand.

This is where the planning becomes trickier, depending on how low inventories will be after this winter and whether the EU has the capacity to haul in continued record volumes of LNG and continue outbidding Asia, especially if demand in China rebounds after a reopening from strict Covid curbs.

With lower gas consumption and not much Russian gas flowing via pipelines, the EU has continued to cut its dependence on Russia, from around 40% of imported gas supplies before the Russian invasion of Ukraine, to less than 9%, according to EU figures from September.

However, the significant drop in Russian gas supply this year occurred only in June.

Ahead of winter 2023/2024, the gap in gas supply in Europe will be much wider without Russian gas. Europe will not be importing much Russian gas—or none at all if Russia cuts off deliveries via the one link left operational via Ukraine and via TurkStream—compared to relatively stable imports from Russia in the first half of this year before Moscow started gradually cutting volumes via Nord Stream in June and then shut down the pipeline in early September.

According to a recent report from the IEA, if Russian gas supply drops to zero and Chinese LNG demand rebounds to 2021 levels, the EU could have a gas supply-demand gap of 27 billion cubic meters in 2023.

With the plunge in Russian pipeline gas deliveries, Europe will need “huge volumes” of LNG next year, commodity trader Trafigura said earlier this month.

“Looking forward, we expect gas and LNG markets to remain volatile,” Trafigura said in its annual report for the year to September 30. 

“While Europe should avoid a blackout this winter by drawing on inventories and cutting demand, it will need to import huge volumes of LNG in 2023 given the massive reduction in flows from Russia,” Trafigura said.

Natural gas prices in Europe will have to remain elevated so that the continent can continue to attract most of the LNG cargoes in competition with the other key demand centers, according to Trafigura. The commodity trader expects Europe to prioritize the security of supply “through next winter and beyond.” 


Huge uncertainties with weather and the EU’s ability to compete with a potential increase in LNG demand in Asia will determine how Europe will fare next winter.  

“Behind us now are two months of ‘buyer’s market’ with peak inventories, warm weather, a long queue of LNG ships, and depressed TTF prices,” commodity analysts Ole Hvalbye and Bjarne Schieldrop of SEB Bank said in early December.

“Ahead of us is the huge Q1 uncertainty and at least 12 months of ‘seller’s market’ as the race is on to fill EU nat gas inventories to a satisfying level by October 2023.”   

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on December 19 2022 said:
    The global natural gas market is so tight that all available capacity for both piped gas and LNG has already been contracted. Any extra LNG capacity will have to await capacity expansion of both Qatar and the United States after 2026. That is why China rushed to sign a 27-year agreement with Qatar for the annual supply of 4 million tons of LNG.

    This doesn’t bode well for the EU countries who will continue to be bedevilled by difficulties to replace Russian gas supplies and finding new LNG supplies and also by a continuing energy crisis crippling their economies well into the future.

    Despite successfully filling its gas storage ahead of winter this year, Europe’s energy crisis is far from over. By next March the level of their gas storage would have been dwindled from almost 90% to 10%. And with a very tight market, it will be virtually impossible for the EU to fill its gas storage for 2023/24.

    Total energy costs are reported to have risen by an estimated $1.06 trillion amounting to 6% of the annual GDP of the EU.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • Peter Farley on December 23 2022 said:
    That assumes
    a) French nuclear output will be as bad as this year
    b) Russia and Iran do not find more ways to supply gas to China and India
    c) Wind and solar output in the EU does not increase
    d) Energy efficiency targets have no effect
    e) hydro output does not recover from the drought.

    Hydro and nuclear returning to normal will add 90 TWh to Europe's energy supply. The EU has added 41GW of solar and about 15 GW of wind which should add another 100 TWh. The two combined is more than half this year's output from gas power generation. If coal power generation stays elevated then and gas prices stay high, gas generation may fall by up to half. Energy efficiency and heatpumps may also see heating demand for gas fall by 15%
    China seems to be substituting domestic coal and gas for imports of LNG as coal and gas production are much higher than increases in thermal electricity

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