The IEEFA (Institute for Energy Economics and Financial Analysis) reports that the invasion of Ukraine is powerfully affecting global gas demand, with LNG unable to deliver energy security for Europe or the world. In less than nine months, Europe will be heading into another cold winter, this time presumably without the gas supplies they’ve previously relied upon.
Around 44% of Europe’s gas comes from Russia. Germany is even more reliant – occasionally 75% of its gas is Russian-sourced. In the months leading into the conflict, Russia constrained gas supply delivering only contractual minimums to Europe and no excess volumes beyond. Europe had grown accustomed to the luxury of summer spot purchases and when that gas did not materialise, there were no viable alternatives available. So Europe entered the winter with its gas storage capacity not filled.
The global LNG market is finely balanced. Shortfalls have sent prices rising astronomically. The Dutch TTF, the benchmark hub for gas prices in Europe, went from under €5/MWh in mid-2020 to nearly €20/MWh in early 2021. On 7 March 2022 prices closed at €227.20/MWh. In less than two years, European spot gas prices have risen over 4500%.