Europe is currently witnessing a spike in gas prices. On the Dutch TTF, the price of gas rose to 163 EURs (more than 183 USD)/MWh. Meanwhile in the UK, it jumped to 408.3 British pence-per-therm (measuring the energy output of a unit of gas).
Prices in both markets have toppled previous records set in October, causing the energy market to continue to “heat up” before winter in Europe. Currently, gas prices have increased by about 7 times, compared with the beginning of the year.
Europe's gas reserves have been exhausted after a long winter in 2020, while a sharp drop in wind volume affects wind energy extraction.
According to the data of the gas transport operator Gascade in Germany, the amount of gas pumped from Russia has decreased after the Gazprom energy group began to feed gas into the second branch of the Nord Stream 2 pipeline. As a result, the amount of gas transported to Germany through the Mallnow compressor station on the German-Polish border has dropped sharply, with the average flow this month ranging from 9 to 12 million kWh/hour.
As the largest gas supplier to Europe, Russia spends about 30% of the pipeline to supply gas to Germany via Poland. Moscow has repeatedly stated that it can supply more gas to Europe if it is allowed to use Nord Stream 2. The pipeline is completed, but the German regulator is suspending the approval process while the European Union has yet to approve.
Some analysts blame the spike in gas prices on the ongoing controversy surrounding the Nord Stream 2 project. Over the years, this Russian-German energy cooperation project, valued at about 11 billion USD, has faced many obstacles from some European countries and the US-Washington DC fears the project will make Europe increasingly dependent on Russian gas, causing economic damage to traditional transit countries, especially Ukraine.
The rebuilding of European stockpiles has eased concerns about continued fuel shortages, but gas prices have continued to rise over the past week. This is partly due to the cold weather forecast in Europe as winter approaches and gas reserves are currently at their lowest level.
In a note to clients, analysts from Deutsche Bank, Germany said that gas prices increased as temperatures continued to fall amid the cold winter. In addition, rising tensions between Russia and Ukraine also disturbed sentiment, affecting the gas market. It is reported that Gazprom has not placed additional orders in January to transport gas to Europe through Ukraine.
Europe is struggling to cope with its rapidly shrinking supply, especially in the context of the approaching cold spells. Meanwhile, EU countries still disagree on finding a common way to deal with high energy prices.
While not finding a common voice, many EU countries have used their own temporary measures to protect consumers such as cutting energy taxes and subsidising households. However, with unpredictable developments in the energy market, European countries are still facing a difficult winter because fuel prices show no signs of cooling down.
