Does Europe have enough gas?
Will there be enough gas for Europe this winter?
There will be. Imports from North Africa and Norway are close to the highest they’ve been for the past five years, liquified natural gas imports are about average and gas storage facilities in Europe are almost 80% full.
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However, if Russia maintains its policy of exporting only about half of the average gas volumes it exported during the past five years, there will be less gas available to European consumers than in past years and, with global gas markets extremely tight, additional imports will be very expensive.
If the winter is very cold then gas prices will be very high which will encourage electricity generators, industry and possibly even households to reduce consumption. But as long as consumers are willing to pay, there will be gas.
What should Europe do?
In the short-term Europe should let the market work. High prices are necessary to encourage liquified natural gas imports and discourage wasteful consumption. At the same time, vulnerable households should be supported with additional government revenues from VAT and high allowance prices.
In the mid-term, I support the idea of carefully analysing whether individual market players have abused their dominant positions. For example, more and more long-term gas contracts are linked to spot prices and one of the largest counterparts of these long-term contracts, Gazprom, has the means to influence the demand-supply balance in the spot market – for example by not filling its storages in the EU. We should carefully study if there was an abuse of market power.
Moreover, we need a mechanism to shield us from bumpy periods during the energy transition, especially as domestic gas production decreases fast. Simone Tagliapietra and I have proposed a European market-based mechanism to ensure that the EU gas system is flexible enough to weather occasional storms.
Finally, if the clean energy build-up and energy efficiency outpace the decline in fossil fuel supply then energy prices should remain acceptable in Europe.
What shouldn’t Europe do?
Europe should not lock itself into new long-term commitments that extend current dependencies on suppliers that are willing to abuse moments of weakness. Europe should not enter into contracts that force it to buy more gas than we might want in the future. It should not let taxpayers underwrite fossil fuel procurement and should not be blackmailed into approving pipeline projects if they contradict European energy legislation.
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