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Crisis in the EU Gas Market: Genesis, Dynamics and Prospects

  • CRITICAL INNOVATION PROJECT OF NATIONAL SIGNIFICANCE ON CLIMATE
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Studies on Russian Economic Development Aims and scope

Abstract—

The article analyzes the real-time crisis in the EU natural gas market. It is shown that the crisis began in mid-2021, mainly due to omissions by regulators who set the energy transition too fast and made a mistake when assessing liquidity in the physical gas market. By refusing to conclude long-term contracts for the import of natural gas and opting for the spot market, the EU has made itself dependent on unpredictable price fluctuations for raw materials. The EU seeks at all costs to build a spot market for natural gas, the price of which is determined by the current balance of supply and demand. This goal was set because, within the framework of the climate and energy strategy of the European Union, the gas market is increasingly subordinated to servicing the electricity market. Since the spring of 2022, the development of the EU gas market has moved into a system of coordinates set by political interests and energy security considerations. The main long-term structural shifts in the European gas market were: firstly, an accelerated reorientation to LNG imports; secondly, the strengthening of the downward trend in demand; thirdly, the transition of gas prices to a higher level. Higher gas prices push up electricity prices, allowing governments to mobilize the additional financial resources needed to accelerate the green and energy transition. The forced restructuring of the European gas market and the electricity market launched the process of deindustrialization of the industrial core of the EU. The threat of deindustrialization is forcing EU member states to look for ways of non-market support for national industry, which, in principle, can push centrifugal tendencies in the EU.

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Notes

  1. Included in Table 1, indicators are calculated on the basis of official Eurostat statistics. It should be borne in mind that gas imported into Europe can be resold many times already immediately after entering the European gas system and be taken into account in statistics in isolation from the country of origin. The confusion and unreliability of European and international statistics on trade in natural gas, especially pipelines, was rightly pointed out by French researchers [9].

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Zhukov, S.V., Kopytin, I.A. Crisis in the EU Gas Market: Genesis, Dynamics and Prospects. Stud. Russ. Econ. Dev. 34, 830–841 (2023). https://doi.org/10.1134/S1075700723060187

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