BERLIN — Not long ago, German officials were locked in agonizing debates over which industries should be cut off if the country found itself running out of natural gas. Today, with storage facilities almost full to the brim and prices dropping sharply, Europe’s energy crisis is feeling somewhat less urgent.
“If you look back three to four months, nobody expected us to be where we are today,” said Jens Südekum, professor of international economics at the Düsseldorf Institute for Competition Economics. “Things can still go the wrong way, mostly because of temperature or something unexpected like an act of sabotage, but at least for the moment things look better than expected.”
After having to give up its reliance on Russian gas and find alternative suppliers to help prepare for winter, Germany’s gas storage was 97.7 percent full on Thursday. European stocks are at 93.8 percent, well above the goal to reach 80 percent capacity before November.
The flush storage facilities have caused short-term spot prices in Europe to plummet: Europe’s natural gas benchmark price fell to 93 euros per megawatt-hour on Tuesday, a drop of more than 70 percent drop from its peak.
At one point, the hourly Dutch price slipped into the negative, meaning that, with so little space left to store purchased gas, traders were briefly willing to pay someone to take gas off their hands. It marked an extraordinary moment for a continent whose energy market has been upended by Russia’s war in Ukraine.
But there is still plenty of cause for caution, experts say, pointing out that the sharp spot-market declines are essentially a seasonal blip that won’t bring much reprieve for consumers. Prices are still expected to be about seven times normal levels this winter. And some experts say particularly brutal weather could still lead to supply shortages.
Heating is the main use for natural gas in European households. An unusually warm October meant people turned on their radiators less often. Combined with full storage tanks, that led to a moment of oversupply.
“It is like stocking up your refrigerator ahead of a blizzard that doesn’t come — or, more accurately in this case, is a little delayed,” said Dustin Meyer, vice president for natural gas markets at the American Petroleum Institute. “So then, in the very near term, you’re left figuring out what to do with all this food.”
But as the cold sets in, countries will start to draw down their stocks.
“Clearly, there is still a gas crisis,” said Lion Hirth, professor of energy policy at Berlin’s Hertie School. “The fact that we have a few very warm weeks doesn’t change that. Those prices will recover as soon as we get the first cold days.”
Germany’s gas regulator, the Federal Network Agency, pointed out Thursday that despite the short-term fluctuations, “businesses and private consumers must adapt to significantly higher gas prices.”
While the lower prices on the spot market are a “good thing,” changes only “affect consumers with a time lag,” said Beate Baron, a spokesperson for Germany’s Energy Ministry.
“The high price level will, of course, continue to be a burden,” she said, adding that consumers and industries must continue to conserve energy to avert a supply shortage.
Gas-intensive industries are already struggling. German chemical manufacturing giant BASF — whose plant on the Rhine River uses more gas than Switzerland — said this week that it would be permanently downsizing in Europe, citing rising energy prices that make the region uncompetitive.
“In the first nine months of 2022, the additional costs for natural gas at BASF’s European sites amounted to around €2.2 billion compared with the same period in 2021,” the company said.
The usage reductions initiated by industry in reaction to prices have alleviated concerns that the government might have to intervene. Hirth said he would not rule out a scenario in which the government has to ration gas this winter, though he said he is more optimistic than he has been in months that won’t have to happen.
Europe has managed to accommodate a complete cut in supplies through the Nord Stream 1 — the largest gas pipeline between Russia and Europe, before it was blown up in an apparent act of sabotage last month — by essentially “buying the entire market” for liquefied natural gas, said Südekum, who also advises the Energy Ministry. “We’ve brought everything, at any price, and now that paying off,” he said.
Europe’s rush to fill its gas stocks in time for winter, at whatever cost, contributed to an August peak in prices, Hirth said. “If you use a lot of tax money to buy up gas from the market and store it, the price you pay is higher gas prices and crowding out industry, and that’s essentially what governments across Europe have been doing.”
But while Europe was able to top up its supplies without Russia, it doesn’t yet have the infrastructure in place to fully replace Russian gas.
“Even though storage is higher than it was in last five years, Europe will likely rely more heavily on pulling gas from storage than they would in a normal winter,” Meyer said. “Losing that pipeline gas from Russia is still a fundamental challenge. And that problem is still a ways away from being solved.”
Halper reported from Washington.