Gas prices – a new “low” has been reached!

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Gas prices in Europe have recently reached surprisingly low levels. This development contrasts with the high prices in the summer of 2022, when Russia cut its gas exports to Europe and drove up energy bills. Although prices are currently low, there are warnings against being too optimistic as Europe could face further challenges. In this blog post, we explain the factors behind the price drop and how this development should be classified.

What is the gas price?
The European Title Transfer Facility (TTF) benchmark recently hit a low of €35.20 per megawatt hour (MWh), reflecting a level last seen in July 2021 when Russia began straining European energy supplies ahead of its invasion of Ukraine. The TTF reference price peaked at over €340/MWh in summer 2022 after Russia cut its gas exports to Europe, fuelling inflation and pushing up energy bills.

What drives the price of gas?
The decline to 35 euros/MWh is due to the following main drivers

Alternative gas sources: Europe has developed alternative gas sources indonesia consumer email list that make it less dependent on Russian supplies. In particular, last year, liquefied natural gas supplies were secured by sea to replace Russian supplies.
Overfilled gas storage facilities: Europe has benefited from a mild winter that has left gas storage facilities overfilled for the season. It is now possible to fill gas storage facilities to 100 percent even if Russian supplies drop to zero.
Renewable energy sources: The significant changes in the energy sector are also due to the increase in renewable energy sources, particularly wind and solar energy. In addition, European governments have significantly intensified the expansion of renewable energies.
Efficiency measures, behavioral changes: The building sector, which includes households as well as public and commercial facilities, has seen a 20 percent decrease in natural gas consumption compared to 2021, due to lower heating demand. The reasons for this are milder weather, various energy efficiency measures at the municipal level and acceptance and support in large parts of society.
The fall in energy costs has helped to dampen the inflation outlook, allowing central banks to slow their rate hikes.