Published by Jessica Weisman-Pitts
Posted on December 13, 2024
5 min readLast updated: January 28, 2026
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By Forrest Crellin, Nora Buli and Nina Chestney
PARIS/OSLO/LONDON (Reuters) – Europe’s struggling industries are bracing for a new gas price shock over the coming winter months, as colder weather depletes stocks, competition with Asia for liquefied natural gas intensifies, and the prospect of reduced Russian supplies looms.
Since the energy crisis of 2022, when gas prices peaked at nearly 350 euros per megawatt hour (MWh), dozens of firms across Europe have closed factories and cut activity and jobs as high gas prices undermined their competitiveness.
Many are maintaining reduced demand and lower manufacturing activity, with negative implications for Europe’s sluggish growth.
European Union gas demand is 17% below the five-year average observed during pre-pandemic years.
At the same time, gas prices are at their highest level in over a year and analysts predict they will rise further.
“The concern is that we are laying our guard down because energy prices are lower now than what we saw in 2022,” Svein Tore Holsether, CEO of Oslo-listed Yara, a fertiliser company, told Reuters in October.
“It’s important to remind ourselves that we’re still at much higher levels than other key regions like the U.S., the Middle East, and Russia.”
Nervousness about the expiry at the end of the year of a Russian transit deal to supply gas to Europe via Ukraine has helped to drive buying.
Francisco Blanch, the head of commodity and derivatives research at Bank of America, said it could push EU gas prices as high as 70 euros/MWh next year from nearly 50 euros/MWh now.
That compares with average EU gas prices of 17.58 euros/MWh over five years before the pandemic, LSEG data showed.
EU-wide gas inventories are 85% full, some 10 percentage points lower than a year ago, according to Gas Infrastructure Europe data.
That makes the current winter already feel uncomfortable, said Barbara Lambrecht, an analyst at Commerzbank, as cold snaps would cause storage levels to fall faster than during the last two relatively mild winters.
To try to safeguard supplies, the European Commission last week increased its storage filling target, potentially adding to the upward pressure on prices.
SHRINKING INDUSTRIES
Dozens of factories in Europe closed and nearly a million manufacturing jobs were lost over the last four years, Bernstein data showed.
In a report on Europe’s competitiveness in September, former ECB chief Mario Draghi said the loss of relatively cheap Russian gas following the 2022 outbreak of war in Ukraine had a “huge cost” to the economy and that fossil fuels would be needed at least for the remainder of the decade.
“Even though energy prices have fallen considerably from their peaks, EU companies still face electricity prices that are 2-3 times those in the United States. Natural gas prices paid are 4-5 times higher,” the report said.
Current EU prices are nearly five times higher than U.S. gas, which trades at $3.095/mmBtu, equivalent to 10.02 euros/MWh.
A survey by Germany’s chambers of commerce (DIHK) in August found that high energy prices and a lack of reliable energy supplies were hindering industrial production and prompting some German firms to consider relocating abroad.
Yara’s CEO also told Reuters the company was “shifting our energy exposure away from Europe”.
German industry lobby group, the BDI, has cited high energy prices as among the factors that threaten the competitiveness of Europe’s biggest economy.
“The risk of de-industrialisation due to the silent migration and abandonment of many small and medium-sized enterprises in particular is constantly increasing,” BDI President Siegfried Russwurm, who also sits on the board at German industrial conglomerate Thyssenkrupp, said in September.
In France, industries expect to operate at 70-80% of capacity this winter due to high energy prices, especially in the chemical sector, Nicolas de Warren, president of French industrial lobby group Uniden, told Reuters.
“With industry still in the dumps, there is no reason to believe gas demand from that sector will stage a comeback this year,” said analysts at Rabobank, adding that some increase in demand was possible from the heating sector.
EU’s current storage levels, meanwhile, are some 10 billion cubic metres (bcm) lower than last year in absolute terms and the difference will be covered mainly by imports of liquefied natural gas (LNG), Helge Haugane, the head of gas and power trading at Norway’s Equinor, EU’s biggest gas supplier, said.
That will come at a price as competition intensifies for available supplies.
Although the European Union has avoided imposing sanctions on Russian gas, which some members rely on heavily, it has restricted Russian LNG deliveries.
The European Parliament voted in April to pass rules allowing European governments to ban Russian LNG imports by preventing Russian firms from booking gas infrastructure capacity.
That could increase storage withdrawals and push the EU to compete harder with Asia for U.S. and Middle Eastern LNG.
Europe imported 11.3 bcm, or around 170 cargoes, of LNG in November, mainly from the United States and the Middle East, according to LSEG data.
(Reporting by Forrest Crellin, Nora Buli and Nina Chestney; additional reporting by Christoph Steitz in Frankfurt, Jesus Calero in Gdansk and Mark John in London; Writing by Nina Chestney; Editing by Barbara Lewis)
Liquefied natural gas (LNG) is natural gas that has been cooled to a liquid state for ease of storage and transport. It is primarily used for energy production and is a significant component of global energy trade.
EU gas inventories are the stored reserves of natural gas within the European Union. These inventories are crucial for managing supply during peak demand periods, especially in winter months.
The European energy crisis refers to the challenges faced by European countries in securing energy supplies, particularly natural gas, leading to increased prices and economic strain on industries and consumers.
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