Soaring Gas Prices Threaten Europe’s Economic Ambitions

Soaring natural gas prices threaten to inflict fresh economic pain on Europe just as the continent needs to invest in defense, artificial intelligence and competitiveness against China, Reuters columnist Ron Bousso argues.

Benchmark European gas prices climbed to €75 per megawatt-hour last week, more than double their level a year ago and the highest since late 2022. The surge stems largely from the more than six-month closure of the Strait of Hormuz during the war with Iran, which has choked off around a fifth of global liquefied natural gas supplies.

European gas storage sites are about 66% full, the lowest level for this time of year in 15 years. Germany’s reserves stand at 54% and those of the Netherlands at just 48%. Storage levels are expected to peak at only 70%–75% before winter.

LNG exports from the Gulf fell by more than 85% between March and August compared with a year earlier. Higher production elsewhere, particularly in the United States and Canada, offset roughly three-quarters of the losses. That helps explain why prices remain well below the 2022 record, when they briefly exceeded €300 per megawatt-hour.

The European Commission sees no immediate threat to winter supplies. But Bousso argues that the key question is not whether Europe can secure enough gas, but how much it will have to pay for it.

(Reuters, bak)