Gas price plunge brings relief to Europe
European gas prices have sunk to their lowest level since mid-2021, when Russia was just beginning to put pressure on the market ahead of its invasion of Ukraine, Bloomberg reports.
The decline – natural gas futures have fallen by two-thirds already this year – isn’t just easing pressures on household budgets. It also undermines one of President Vladimir Putin’s biggest bargaining chips: the ability to squeeze the region’s natural gas supplies.
As Bloomberg writes, while some traders predict that short-term prices could be negative at times this summer, the picture could not be more different than in May of last year. Back then, futures were quadrupled from what they are now, and countries were forced to revive coal production to keep the lights on after Russia cut gas supplies.
In addition, Europe is stepping up efforts to develop more renewable energy sources. New solar and wind farms and good weather have helped reduce the need for natural gas to generate electricity this year, reducing demand even further.
The drop in prices “is excellent news for Europe and shows that increased LNG imports as well as reduced demand managed to quickly rebalance the European market after Russia turned off the taps,” said Georg Zachmann, senior fellow at the think tank Bruegel based in Brussels.
The Bloomberg article also writes that for households, the price benefits are clearly visible. Eurozone inflation likely slowed to 6.3% in May, the lowest level since Russia invaded Ukraine. In data due on Tuesday, Nomura economists forecast that “lower wholesale energy prices will trickle down to consumers across the euro area.”
