Winter solstice brings both hope and fear to European gas markets | Popgen Tech

Winter weather will play a key role in determining the future economic health of the European and global economies.

Predictions of a short, mild European winter, if they come true, will be a saving grace for Europe and, indeed, for the entire world. A mild winter will allow Europe, especially Germany, to avoid the looming specter of cripplingly high energy prices, gas and electricity rationing and perhaps even dangerous energy shortages.

Gas prices are in focus, hitting record highs since Russia’s invasion of Ukraine and the subsequent loss of Russian gas supplies via the Nord Stream pipeline system. Fortunately, as winter approaches, natural gas inventories in the Eurozone are well above their five-year average, largely thanks to the price shock that has attracted massive shipments of liquefied natural gas known as LNG to flow into Europe’s vast natural gas storage network. Much of this LNG came at the expense of poorer countries whose ability to finance LNG imports could not (and still cannot) compete with the Eurozone’s ability to print money to secure the necessary LNG supplies.

Gas prices across Europe are significantly lower than they were at their peak earlier this year, and they are likely to remain subdued as long as the weather remains mild. This is good news for consumers and governments both in Europe and in the poor, energy-importing countries competing in global markets for LPG imports. This is also good news for the entire world economy, because European countries will not have to bankrupt themselves by subsidizing energy prices for consumers and businesses.

However, if winter tightens its grip across Europe, there could be negative consequences for the entire global economy. Intense, lingering cold could tip the energy scales in Europe, straining the natural gas distribution system that previously relied on a combination of gas supplied from both pipelines and storage to one that now consists of storage and a limited supply of LNG -import facilities. Having an unusually high amount of gas in storage does not necessarily guarantee that gas supplies will be able to be withdrawn from storage when they are actually needed. Unfortunately, shortages due to logistical bottlenecks can occur just as easily as there is a shortage of gas.

A secondary danger is that if the winter lasts longer than usual, European gas supplies could go from a storage surplus (against the five-year average) to a storage deficit that would make it all the more challenging to resupply. following winter is cold. Hopefully the winter will be kind to Europe this year. It would be a much-needed bit of serendipity extended to the entire world as well.