Europe Enters Winter With Costly Gas and Thinner Reserves

Europe’s gas market is entering the new heating season in a significantly more difficult position than expected just a few months ago. Gas storage across the EU is around 66% full — the lowest level for this point in the year in roughly 15 years. At the same time, European gas prices have already risen above €75 per MWh, more than twice last year’s level.

The problem is not a return to Europe’s previous dependence on Russia, but a new global competition for LNG. The prolonged disruption or closure of the Strait of Hormuz amid the war with Iran has sharply reduced liquefied natural gas supplies from the Middle East. According to Reuters, LNG exports from the region have fallen by around 85%, while hot weather in Asia has increased demand and redirected some available gas away from Europe.

Europe Has Gas — But Not the Same Price Buffer

The most important change is that today’s situation is not a repeat of the 2022 energy crisis. The EU has more LNG terminals, a broader network of suppliers and lower overall gas demand. The European Commission says there is currently no immediate risk of a physical gas shortage. Its assessment is that Europe’s energy system remains resilient even with storage levels below those seen in previous years.

But price is becoming the central problem. Europe can secure the gas it needs, but doing so increasingly means competing with Asian buyers and paying more. Norway’s Equinor also expects Germany to be able to secure sufficient supplies this winter, while warning that prices are likely to remain high.

This creates a fundamentally different type of energy risk: the question is no longer whether Europe will have enough gas, but how much its economy is prepared to pay to ensure that it does.

Germany Faces the Greatest Exposure

The situation is particularly difficult for Germany, Europe’s largest economy and one of the continent’s key gas markets. German storage facilities are around 54% full, while the Netherlands is at roughly 48%. Italy, France and Spain are in a considerably stronger position.

Berlin’s problem extends well beyond household heating. Gas remains important for industry and power generation, while high prices directly affect the competitiveness of German companies. If European manufacturers are forced to pay substantially more for energy than competitors in the United States or Asia, an energy crisis gradually becomes an industrial one.

This is where the winter gas problem intersects with the wider question of Europe’s economic future. The EU is simultaneously trying to increase defence spending, invest in artificial intelligence, support strategic industries and close the gap with China. Expensive energy complicates all of these objectives by raising production costs and reducing the room available for investment.

The Old Energy Model Is No Longer Enough

After 2022, European gas policy was built around two principles: diversifying supplies and maintaining high storage levels. The strategy has largely worked. The EU has sharply reduced its dependence on Russian gas, increased LNG imports and expanded regasification capacity. Gas storage provides around a third of the EU’s winter consumption and remains one of the key instruments of European energy security.

But the current crisis exposes the limits of this model. Diversifying suppliers does not automatically mean independence from the global market. When supplies from the Middle East are disrupted, demand in Asia rises and the window for refilling European storage narrows, Europe is forced to compete for the same LNG on the global market.

Weather adds another layer of pressure. A hot summer increased the use of gas for electricity generation, meaning that some gas that could otherwise have gone into storage was consumed directly. The European Commission has already pointed to higher gas demand for power generation during periods of extreme heat.

The Risk May Extend Beyond This Winter

The greatest danger may not be that Europe runs out of gas this winter. The more important question is how much it will cost to avoid a shortage.

If high prices persist, European consumers and industry will effectively finance the global competition for LNG. That could trigger another cycle of government support for energy-intensive sectors, subsidies for households and political pressure on governments to bring down energy bills. At the same time, the fiscal space for large-scale support programmes is considerably smaller than it was during the 2022 crisis.

Europe also risks facing a difficult choice between short-term stability and long-term investment. Money spent on expensive energy cannot simultaneously be invested in grid modernisation, clean generation, industrial policy or defence.

That is why the current gas crisis could leave a much deeper mark than one expensive winter season. The EU has already demonstrated that it can withstand a physical supply shock. It is now being tested on whether it can remain competitive in a world where energy is increasingly becoming a geopolitical resource.