Its European prices natural gas have risen by about 45% this year, weighing on households and industry struggling to recover from the worst cost-of-living crisis in decades, according to Bloomberg. The situation is likely to become more difficult as Russian gas flows to Europe through Ukraine are to stop on January 1st.

Natural gas contracts for next year already carry a premium, a strong signal that prices are poised to stay higher for longer, which ultimately translates into higher bills for consumers. Some traders estimate that the impact of the interruption of flows will be up to 10 euros per megawatt hour higher than if flows continue.

The time of termination of the transit contract between Ukrainian and of Russia she looks dangerous. Europe’s natural gas reserves, a safety “cushion” for more difficult times, are being depleted at a faster rate than normal due to periods of cold weather, which may make it harder for traders to secure supplies for next winter. The weather is about to get colder, potentially increasing demand for natural gas for heating.

“High prices have inevitably weighed on industrial competitiveness and economic performance,” MET Group analysts said on Monday. As for the future, “capacity delays or stronger-than-expected demand from Asia – due to the economic recovery or cold weather – could weigh on the market.”

The 15 billion cubic meters of natural gas that Russia currently sends through Ukraine each year corresponds to less than 5% of Europe’s total needs. Still, the loss of one of the last remaining pipeline routes for Russian gas will put more pressure on an already tight natural gas market and push global prices higher, Energy Aspects analysts said this month.

Their base case scenario is that natural gas contracts will remain at high levels. This reflects a “lack of flexibility in the global balance”, due to factors such as the difficulty of replenishing storage facilities by the end of October next year.

Almost three years since the war in Ukraine disrupted Europe’s energy market, sending prices soaring, the balance remains very delicate. Europe has worked to diversify its sources of supply by buying more sea freight, increasing its reliance on Norway and developing renewable energy. Still, prices remained highly sensitive to any perceived risk to output, particularly at a time when Asia has boosted liquefied natural gas (LNG) markets as extreme heatwaves become more frequent, and China, the leading importer, has ramped up storage capacity, intensifying competition for the fuel.

Over the weekend, Slovakian Prime Minister Robert Fičo, whose country is heavily dependent on Russia for natural gas, estimated that European households and businesses could face an extra €40 billion to €50 billion. euros annually in higher natural gas prices and another 60 to 70 billion euros per year in additional electricity costs. In the UK, the energy price cap, which represents the annual bill for a typical household and largely reflects wholesale electricity and gas prices, is set to rise for the third time in a row in April, posing a problem for the Central Bank of England as it tries to keep inflation under control.

The European economy has been slow to recover from the crisis amid uncertainty over energy costs and more stable prices would allow businesses and households to organize their spending. The situation is difficult in Germany, where many factories have been forced to stop or limit production due to high energy costs. The faster gas draw from reserves sends an ominous signal that pressure on Europe’s biggest economy could continue for a third straight year.

Last week, European Central Bank President Christine Lagarde said in an interview that the central bank is close to achieving its 2% inflation target, but remains cautious about services inflation. Her remarks came at the end of a year in which Lagarde and her colleagues began to ease unprecedented monetary tightening.

“Gas across Europe is now a bit more expensive, creating some cost pressure in Europe, but nothing like what we saw during the energy crisis”said Jamie Rush, chief economist for Europe at Bloomberg Economics. “We still expect inflation to fall below the ECB’s 2% target in 2025,” concluded.

It is noted that natural gas for January delivery is currently around 47.3 euros per megawatt hour, with a drop of 1.13%.