Gas prices in Germany, the EU’s largest economy, are expected to skyrocket and remain high until at least 2027, according to a recent report by the Economy Ministry. The report states that based on forward prices at the end of June, wholesale gas prices could reach around €50 per megawatt-hour ahead of the heating season, with expectations of remaining high for the next four years.
To address potential problems arising from the high prices, the ministry has pledged to monitor developments in the gas markets. However, the report suggests that unless additional emergency measures are taken, Germany will continue to face gas shortages during the upcoming heating seasons.
These projections align with a recent forecast by the German gas storage operators group INES, which warned of the country’s vulnerability to gas shortages unless it invests in additional fuel infrastructure. This includes increasing liquefied natural gas (LNG) terminals, storage capacity, and pipeline connections.
Germany’s heavy reliance on Russian gas, accounting for approximately 40% of its gas supply before 2022, posed a challenge when energy deliveries were significantly reduced or halted after EU sanctions were imposed on Moscow due to the conflict in Ukraine. Despite efforts to diversify its gas sources and reduce energy consumption, experts have cautioned that shortages remain a persistent threat, along with a surge in prices.
To mitigate the impact of high energy costs on consumers, the German government has already paid €22.7 billion in power and gas subsidies since last year. These subsidies include a one-off payment in December to alleviate the burden on customers.
At present, EU benchmark gas futures for September delivery at the TTF hub in the Netherlands are trading at around €38.6 per megawatt-hour in household terms. Earlier this week, prices surged to almost €47.6. This current price is roughly double the average price between 2008 and 2021, which was around €19.40.
Berlin’s anticipation of soaring energy prices reflects the increasing concerns surrounding the stability of gas supplies and the potential impact on end-users. As gas prices in Germany continue to rise, it is crucial for policymakers to assess the long-term energy security of the country. This includes exploring innovative solutions, such as renewable energy sources and energy-efficient technologies. By diversifying its energy mix and investing in robust infrastructure, Germany can mitigate the risks associated with volatile gas prices and ensure a stable energy supply for its citizens.
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