Europe is heading into the cooler months with gas stores at their lowest level in 13 years, and the people who will feel it first are the ones who don’t get a seat in Brussels boardrooms or energy trading desks. The EU’s gas stocks were 63% full in the last week of August, far below the 80% average for late August over recent years, while traders and analysts warn that the bloc is drifting into a winter of higher prices and tighter control over a basic necessity.
Brussels, Markets, and the Price of Heat
Greg Molnar, a gas analyst and professor, said the EU is likely to enter the winter heating season with gas stocks about a fifth below the five-year average and at their lowest level since 2013. That’s the number that matters. Not the polished language of resilience, not the usual institutional self-congratulation, but the fact that the continent’s energy system has left households and workers exposed to market volatility just as temperatures fall.
Molnar warned that “low storage levels are naturally increasing the risk of heightened winter price volatility,” and said the risk could get worse with “cold spells or slow wind patterns” increasing gas usage over the winter. The language is technical, but the effect is blunt. When storage runs low, the market gets to decide who pays. When the market gets nervous, ordinary people get the bill.
The UK may be especially exposed because it is one of the biggest gas consumers in Europe but has some of the lowest levels of domestic gas storage capacity. It typically relies on imports via pipeline from Europe or tankers from the US and the Middle East. Chris O’Shea, chief executive of the British Gas owner Centrica, said this week the UK had “almost no gas in storage” for the coming winter. That’s not a minor administrative hiccup. It’s a reminder that the system has been built around dependence, fragility, and the assumption that supply chains will always be there when the weather turns.
Fortress Energy, Market Discipline
The EU’s gas stores have struggled to rise towards a watered-down target of 80% full by the start of winter since the US-Israel war on Iran triggered severe disruption to exports of oil and gas from the Gulf region. A cold end to last winter, and higher-than-usual gas power generation during Europe’s heatwaves this summer, have also contributed to the bloc’s depleted gas stores. In a typical year, owners of storage facilities fill them up during the summer when demand and prices are lower. This year, the system didn’t do what it was supposed to do. The result is a continent entering the cold season with less cushion and more exposure.
Europe’s gas market prices have “stayed relatively calm” this summer in the hope that the strait of Hormuz would be reopened and winter stocks could be rebuilt. But Bjarne Schieldrop, chief analyst commodities at the Nordic banking group SEB, said “no one expects it to happen any time soon.” He added that “as a result, the European natural gas market has run into a bit of a winter panic over the past week.” The panic isn’t abstract. It’s the market discovering that its own assumptions have limits.
Although Europe is not expected to experience physical shortages of gas this winter, traders expect higher prices. The benchmark gas price has climbed to three-year highs above €68 per megawatt-hour in recent weeks, more than double the price at the start of the year. Prices have risen on the growing expectation that market traders in the EU will need to compete with Asian buyers to secure cargoes of liquefied natural gas as temperatures begin to cool. Goldman Sachs analysts said that without a return of gas exports from the Middle East, Europe’s benchmark price “would likely need to move above €100/MWh” to attract enough shipments to meet winter demand.
Who Gets Protected, Who Gets Squeezed
Gas supply concerns are especially acute in western Europe, where storage levels are well below those in Italy and Poland, which have managed to top up their gas stores to over 80% full. Germany, which has Europe’s largest gas storage capacity, has facilities about half-full, according to Gas Infrastructure Europe. Belgium and the Netherlands, which connect directly to the UK gas market via gas pipelines, stand at 51% and 45%. The geography of shortage matters because it maps onto the geography of pressure. Some states are better stocked. Others are left more exposed. None of it is democratic.
The UK’s reliance on global gas imports is expected to deepen as declining gas production from the UK’s North Sea sector accelerates, and Norwegian output begins to fall from 2030. The government is considering plans to provide direct financial support to safeguard domestic gas infrastructure after an official consultation found that homes and businesses risk running out of gas within the next decade, despite its growing clean energy sources. That support could include money for owners of gas storage facilities and pipeline operators, so they can upgrade and maintain them in the decades ahead. Public money, private infrastructure, and the same old arrangement: the state socialises the risk while the operators keep the leverage.
The UK energy regulator, Ofgem, said this week that typical gas and electricity bills will rise by 4% from October under its quarterly cap, after climbing 13% at the start of July, to take account of global energy market price rises caused by the war on Iran. The cap doesn’t cap the power of the system. It just manages the pain. The people at the bottom still pay for a market that treats heat like a commodity and winter like a trading opportunity.