In recent weeks, the price of natural gas has been rising again – bringing back the unpleasant memory of the energy crisis after the Russian invasion of Ukraine in 2022.

At that time, energy prices combined with high inflation had caused strong concern about possible black outs, put a heavy burden on energy-intensive industries and led to the closure of industrial units, as well as many layoffs. Nevertheless, Europe managed to cope with the challenges during the last two winters due to favorable weather conditions.

With the cold that November brought, however, the price of natural gas rose again, reaching on November 21st even 49 euros per Megawatt hour – the highest level in more than a year.

Is the concern justified?

Due to the lower temperatures, energy consumption for heating also increased sharply. At the same time, mild winds were recorded in northern Europe, which also limited wind power generation – and therefore further increased demand for natural gas.

Of course, prices are still at levels well below those of 2022, because the overall demand for natural gas has decreased over the last two years. In addition, the remarkable price increase in November is also due to the fact that throughout the rest of the year prices remained lower than at any other time since the start of the war in Ukraine.

“Since mid-September, prices have increased by about 40%,” Petras Katinas, energy analyst at CREA (Centre for Research on Energy and Clean Air), tells DW. “This was a large and sudden increase.” Many worry that a colder winter will significantly reduce energy supplies – and thus fuel a renewed surge in prices.

Katinas observes, however, that Russia’s influence on the European market has been significantly reduced since 2022, hence speaking of a “crisis” is a bit of an exaggeration. “I wouldn’t call it a crisis, especially if we take into account what happened in 2022 and 2023,” adds the expert. “The majority of EU member states are no longer so dependent on Russian gas.”

What finally happens to the Russian gas?

When it comes to EU gas supplies, Russia has long ceased to play as pivotal a role as it once did. In 2021, Russian pipeline gas accounted for 40% of member states’ imports, a percentage that in 2023 fell to 9%.

Meanwhile, Russian pipeline gas supplies to the EU appear to be slowly being cut off entirely. After a legal dispute, Austria, one of the last European states still supplied with pipeline gas from Russia, has decided to end supplies from Russian state energy company Gazprom. Slovakia and Hungary are still receiving Russian gas, but all indications are that these imports will stop at the end of the year.

The five-year gas contract between Gazprom and Ukrainian state-owned Naftogaz to transport Russian gas through Ukrainian territory expires this year, and the Ukrainian government has announced there will be no deal to extend it. As Boris Dodonov, head of the Center for Energy and Climate Studies at the Kyiv School of Economics, explains, “Ukraine has no financial interest in extending the agreement.”

Is LNG the solution to all problems?

Due to the reduction of Russian pipeline gas supplies from 2022 liquefied natural gas (LNG) has become very important for both Russia and the EU. This year Russian LNG imports to the EU have so far increased by around 15%.

For his part, Dodonov argues that given the supply of LNG from the US, Europe will no longer need Russian gas to cover its energy needs. The expert estimates that upon his return to the White House, Donald Trump will increase LNG production – and then Europe will probably be ready for a major gas supply agreement from the US.

Ed Cox, head of global liquefied natural gas at ICIS, an independent commodities data provider, points out that liquefied natural gas now makes up 34% of Europe’s existing gas – double the pre- Russian invasion. At the same time, however, the transition to liquefied natural gas also means that Europe is more vulnerable to international price increases.

Cox believes that if the winter is indeed colder than the previous ones and as long as the agreement with Ukraine is not extended, Europe could continue to meet its natural gas needs with LNG. But there is a risk of significantly higher prices because LNG supply cannot increase significantly in the short term. “Europe can get enough liquefied gas if it needs it. This would however mean that European prices would rise in order to be able to compete with demand from Asia.”

Moreover, higher prices will have long-term consequences. In conclusion, as Cox sums up, “the question is not whether we will have enough LNG or natural gas, but how much it will cost us.”

Edited by: Giorgos Passas