Within months of Russia’s invasion of Ukraine last year, there was near panic in Europe over energy supplies. Mainstay flows of natural gas through pipelines from Russia were dwindling to a relative trickle, pushing wholesale prices up more than 10 times the level of a year earlier. Oil prices were high. Lawmakers warned of fuel rationing and rolling blackouts, and winter loomed.
Now Europe has plenty of gas, much of it from Norway, the shale fields of Texas, and Qatar. The price has tumbled below preinvasion levels and has continued to slip lower almost daily. Oil prices appear steady. There no longer talk of imminent rationing.
But it’s unclear if the danger has been banished, or whether the maneuvering last year that secured this position — when European countries seemed to spare no expense buying shiploads of expensive liquefied natural gas and China cut its energy needs as it shuttered its cities in “zero Covid” lockdowns — will be needed again this year.
There are concerns that complacency has set in, and some leaders of the energy industry warn that Europe has been lucky this winter. They say the coming years, with a revived Chinese economy potentially sucking in more energy imports, may be more of a test.
“We are not out of the energy crisis in Europe — far from it,” said Wael Sawan, chief executive of Shell, Europe’s largest energy company, on a recent call with financial analysts.
For now, a reliance on Russian energy that seemed more like a chokehold a year ago has significantly loosened. Russian gas supplies to Europe have been drastically reduced, and the region seems to be weathering recent bans on most Russian oil without a hiccup.
“Within a year, Europe has totally made itself independent from its biggest fossil fuel supplier,” said Henning Gloystein, director for energy at Eurasia Group, a political risk firm.
Bolstering the optimism: The coldest part of winter, when gas consumption soars, has passed with less economic pain than many forecast. “Europe has appeared to survive without a deep recession, and appears to be in a better position than six to nine months ago,” said Michael Stoppard, chief strategist for global gas at S&P Global Commodity Insights.
Energy markets are much calmer than a few months ago, but European gas futures prices, at about 50 euros ($53) per megawatt-hour, are still more than double the levels of two years ago.
Analysts say that price level may be a new kind of normal, reflecting recent realities like competing with Asia for liquefied natural gas.
While consumers’ utility bills remain high, they may soon start to fall. After appearing to peak last autumn, inflation is easing in Europe, as are costs to governments for protecting bill payers. Martin Young, an analyst at Investec, an investment bank in London, forecasts that a key British home energy charge known as a price cap will fall more than 50 percent by July to an annual average of £2,190 ($2,620) per household.
At the same time, oil prices have dropped to about $82 a barrel for Brent crude, from last summer’s highs of about $107. Russian crude and oil products, subject to bans in much of Europe and other Western countries, are now heading for India, China and other markets, and European nations are receiving more tankers from the Mideast, Latin America and the United States, according to Viktor Katona, an analyst at Kpler, which tracks energy shipping. Russia said recently that it would reduce its oil production by about 5 percent, which may indicate that it is encountering problems selling its oil.
Plenty of experts say Europe has been fortunate this winter. Mild weather has helped reduce demand for gas, which is heavily used for heating in Europe, while Beijing’s Covid restrictions curbed China’s appetite for gas, pivoting many L.N.G. shipments to Europe instead.
The worry is that next winter, colder temperatures combined with a resurgent, energy-hungry Chinese economy could put pressure on global gas supplies and cause prices to surge again.
“If China starts buying because they have opened up, and it is cold, then we are in trouble for the next couple of years,” said Marco Alverà, chief executive of TES, which plans to build facilities for importing gas in Wilhelmshaven in northwest Germany. As a precaution, the German government is urging consumers to remain frugal with energy.
Experts like Mr. Alverà also say Europe has missed opportunities to lock up gas supplies from the United States with long-term contracts, largely because lawmakers don’t want to undermine climate goals aimed at reaching carbon neutrality by 2050. At the same time, Europe has so far failed to come up with a program like the Biden administration’s Inflation Reduction Act, which provides businesses with large tax breaks for clean energy investments.
Europe has “a lot of catching up to do,” said Mr. Alverà, a former chief executive of Snam, an Italian gas transmission company.
In addition, gas production facilities around the world have been running flat-out with only modest additional supplies expected to come onto the market in the next two years. “Any supply disruption will have an impact on the market,” Anders Opedal, the chief executive of Equinor, the Norwegian oil company, told reporters in London recently. Norway last year replaced Russia as Europe’s largest gas supplier.
Europe, though, has taken steps that will leave it much better prepared than it was a year ago, analysts say. Once Russia invaded Ukraine, European policymakers quickly realized that decades of dependence on Russian gas had left them dangerously exposed. Governments and companies secured new sources in the form of L.N.G. Paradoxically, shipments of L.N.G. from Russia also increased.
Governments also rushed to build terminals to receive the fuel. Germany, which had no L.N.G. facilities before the war, has already put three terminals into service and plans three more by the end of this year. The construction moved at a speed previously unthinkable in a country notorious for red tape. The Netherlands and other European countries have also added or expanded such facilities.
Europeans also responded to calls to reduce gas consumption as much as possible, installing heat pumps to replace gas boilers and stoking wood-burning stoves. Some energy-intensive factories in industries like fertilizers, glass and steel also reduced production, contributing to a 14 percent drop in gas demand last year, according to S&P Global, a financial services firm. A big question is whether this steep cut in demand will prove permanent.
European countries also went on a natural gas-buying binge to fill underground storage facilities before winter. In Germany, several storage sites were owned by Gazprom, the Russian gas giant, which was accused of draining them to spook the markets. Berlin took control of these facilities and refilled them.
While the move benefited Russia, which sold some of the gas and drove up prices, it also brought benefits. Storage levels across the European Union are more than 60 percent of capacity; in Germany, the bloc’s largest gas consumer, they exceed 70 percent. Those levels are roughly double those of a year ago and have helped calm markets.
Europe is likely to end the winter with far more gas in storage than a year ago, and won’t need to buy as much to refill the facilities as it did this year. “Next winter is looking less concerning than this winter,” Mr. Stoppard said.
