Gas prices in Europe have fallen to summer levels. With gas reserves full, Putin might just have lost the energy war.
It was Vladimir Putin’s big bet and his secret to win the war in Ukraine. Right now, however, the balance is definitely not in his favor. The energy war between Europe and Russia is rewarding EUs prudence, at least for the moment.
When Putin invaded Ukraine in February, he bet to sway away EU support to Kyiv by turning off gas supplies. Many countries relied on Russian gas to support their economy. Germany, in particular, has long favored new deals with Putin instead of calling for energetic independence. The result was the creation of two pipelines below the Baltic Sea: Nord Stream 1 and 2. Both of them are now not only closed down, but damaged by a mysterious sabotage.
This means that Europe had to find new sources of natural gas, a difficult task to achieve in the short term. So, Putin hoped that without heating and energy supplies, European countries would fold under pressure and withdraw support to Ukraine.
Right now, however, Europe sits in a much better position, also thanks to their preventive moves. Immediately after the 24th of February invasion, European governments filled their gas reserves. By the beginning of October, they were already filled at 94% of capacity.
This meant buying more gas from Russia before all the taps would be definitely closed. With this money, Putin has been able to finance the war in Ukraine, but now the influx has stopped for good.
How much gas does Europe have left
With natural gas reserves full and unexpectedly warm weather, Europe has much more leverage against Russia than before. Gas prices have fallen down to June levels, plummeting 70% of the spike Europe experienced in August.
Southern countries like Italy, Spain and Greece have reported gas usage at record low levels. This is because of the unnaturally warm weather, and therefore they can keep their reserves longer.
Even Germany, which talked about closing down some gas-hungry industries, is doing just fine. Their storage is 97% filled, and no rationing had to be implemented yet.
This scenario is not going to last forever. Experts warn that in December and January gas prices could truly hike, and some rationing might be needed. The energy crisis many warned about in the last months might just have been postponed.
The other issue is that next year there will be no Russian gas to fill the storage with. The current reserves are due to finish next spring, as it is always the case. Where would Europe take the gas then?
The good news for Europe is that it has almost an entire year to figure this out. The EU is hastily trying to put together policies on gas usage and price regulation (despite Germany’s best effort to block them). Further, Italy is trying to become a southern European hub for natural gas, building a new LNG port and closing new deals with Algeria.
The energy war is not over yet, but the balance is slowly going in favor of Europe. Putin’s calculations might have been abysmally wrong.
