Europe has spent an astronomical amount to fill gas storage

But that may not save her economy.

Refusal of Russian fuel costs Europe dearly. The EU states spent a record, unprecedented amount of $104.8 billion to fill underground gas storage facilities (UGS), and in the future, costs will only grow, Bloomberg notes. According to him, the EU’s desire to fill the reservoirs at any cost before the first cold weather “required the maximum use of alternative sources – from Norway to the United Arab Emirates.”

According to Anis Ganbold, head of global energy markets research at Aurora Energy Research in the UK, the current costs are about double the total amount of US financial assistance to Ukraine.

“These are huge numbers. The price will probably go up next year. A cold winter can completely deplete reserves, and the purchase of gas to fill storage facilities will lead to a halt in production, ”Bloomberg quotes her as saying.

The head of the German Federal Network Agency, Klaus Müller, also points to the same danger. While the winter could be warm until the end of January, he said, it only takes a few “ringing cold days” for a sharp increase in gas consumption. “When it gets really cold, the vaults get empty quickly,” Müller noted in a commentary for Spiegel magazine.

There is clearly growing concern on the continent that the energy crisis will worsen this winter. The atmosphere of heightened tension is reducing business activity: in October, the contraction was the largest since the end of 2022. Inflation in the Eurozone reached 10.7% in October, more than five times higher than the target level of the Unified Central Bank.

“The main threats for Europeans are manifested precisely in the field of economics,” says Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation. – Of course, it is unlikely that the population will physically freeze in the coming winter, especially in large cities. Although in some settlements there may be problems due to the peculiarities of their heat supply. Gas reserves in the UGS have indeed been accumulated large, in addition, the European Union has alternative suppliers of pipeline gas and liquefied natural gas (LNG) – Norway, Algeria, the United Arab Emirates, and, to a lesser extent, Azerbaijan. The European market is supplied with LNG from all over the world, because the prices here are the highest.”

But if in the old days the EU countries spent no more than €5-7 billion per year on the purchase of gas for injection into underground storage facilities (buying mainly in the summer, when raw materials are cheaper), today it takes incomparably more money, which spurs inflation. Moreover, the situation hits, first of all, industrial facilities, in which gas consumption volumes sank by about 30%. Yes, someone switched to coal, but this does not save everyone. Stop not just enterprises, but entire sectors: metallurgy, pulp and paper, glass industry, production of nitrogen fertilizers, Yushkov lists. Farmers last year were forced to close many greenhouses that are heated by gas.

“It’s hard to say how deep the energy crisis will be in the heating season,” the MK interlocutor says. – Firstly, gas consumption volumes on the continent are declining, and it is not clear what they will be by the end of the year. Secondly, the stability of supplies from different sources raises questions. And what if by the new year Ukraine blocks the transit of Russian pipeline gas through its territory, citing Moscow’s failure to comply with the terms of the contract? This is minus 42 million cubic meters per day. The prospects for LNG supplies are not entirely clear, because during the heating season, China itself may well compete for it with Europe, offering producers a higher price.”

And won’t Brussels itself mess things up by approving, say, a price ceiling for Russian gas or a complete ban on its supplies to the EU? Finally, and most importantly, no one knows what the temperature will be like in winter. So far, the Europeans are lucky: October and early November were very warm, which provoked a drop in prices on the spot market for long-term contracts.

However, the most difficult period of the heating season traditionally falls on February-March: by this time, the UGS runs out of gas even under normal conditions. According to Yushkov, this means that current needs will have to be covered by current imports, which, with a limited supply, are growing, whipping up quotes and, accordingly, general inflation in the eurozone.