Industry Voice: The Energy Crisis Is Only Just Beginning

Wholesale gas prices surged in the summer, leading to dire predictions of blackouts, rationing, and people freezing in their homes. Since then, prices have retraced as it has become clear that most European countries have largely succeeded in filling their gas storage facilities ahead of the winter. It would be a mistake to assume the energy crisis is over though—in many ways, it is only just beginning.

After the invasion of Ukraine, Russian President Vladimir Putin sought to use Russia's vast oil and gas reserves as a tool to weaken opposition among western countries. Given the dependence of Germany, Italy, and other European countries on cheap Russian energy, there were concerns that standing up to Russia would inflict more economic and social damage than the continent could stand.

But the threat of turning off the gas was a weapon that Putin could only fire once. As the threat became clear, countries began scrambling to find alternative sources of energy. Since the invasion, gas imports from Russia to European Union (EU) countries have fallen significantly, largely offset by a sharp increase in imports of liquefied natural gas (LNG) from the U.S. and Qatar. At one point, there were so many LNG tankers queuing up at European ports that gas spot prices briefly went negative.

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