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EC President von der Leyen lauds speed of European gas price fall

Highlights

Gas prices came down 'quicker than anyone expected'

Europe has overcome 'dangerous' dependency on Russian gas

EU demand down by 20% in period August-November 2022

  • Author
  • Stuart Elliott
  • Editor
  • Daniel Lalor
  • Commodity
  • Natural Gas
  • Topic
  • Europe Energy Price Crisis

European Commission President Ursula von der Leyen said Jan. 17 European gas prices had fallen more quickly than expected as a result of the continent's "collective will".

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Speaking at the World Economic Forum in Davos, von der Leyen said the EU had also overcome its "dangerous dependency" on Russian gas.

"Through collective effort, we brought down gas prices quicker than anyone expected," von der Leyen said.

"From a peak in August, European gas prices have now dropped by 80%. That is below the levels of before the Ukraine war. Europe has once again shown the power of its collective will," she said.

Platts, part of S&P Global Commodity Insights, assessed the benchmark Dutch TTF month-ahead price at an all-time high of Eur319.98/MWh ($346/MWh) on Aug. 26.

Prices have weakened since on the back of healthy storage and demand curtailments with Platts assessing the TTF month-ahead price on Jan. 16 at Eur54.98/MWh, 83% below the August high.

It was also significantly lower than the TTF month-ahead price on Feb. 23, 2022, the day before Russia launched its invasion of Ukraine, of Eur88.68/MWh.

Prices were also close to the 2021 TTF month-ahead average of Eur47.10/MWh, according to Platts assessments.

Von der Leyen said the reaction to the Russia-Ukraine war was evidence of the EU pulling together "when it matters the most".

"A year ago, Europe had a massive dependency on Russian fossil fuels built up over decades. This made us vulnerable to supply squeezes, price hikes and Putin's market manipulation," she said.

"In less than a year, Europe has overcome this dangerous dependency. We have replaced around 80% of Russian pipeline gas. We have filled our storages and reduced demand by more than 20% in the period from August to November."

Demand reduction

In late December, EU statistics agency Eurostat said EU gas consumption over August to November was 20.1% lower than average for the same periods from 2017-2021.

EU member states had agreed in July to reduce gas demand between August 2022 and March 2023 by 15% compared to their average consumption from the previous five years, through measures of their own choosing.

Eurostat said that in 18 member states, consumption dropped beyond the 15% target and in some by above 40%.

Consumption fell the most in Finland (down 52.7%), Latvia (down 43.2%) and Lithuania (down 41.6%).

However, six member states failed to meet the target, though they did still reduce consumption, while two countries saw an increase in gas consumption in the August-November period -- namely Malta (up 7.1%) and Slovakia (up 2.6%).

Cyprus has no gas consumption.

A senior European Commission official said Dec. 14 that EU member states would probably have to extend their efforts to reduce demand as part of preparations for winter 2023/24.

"We are preparing for the situation to endure rather than believing that this will be solved by next winter," Paula Pinho, director for just transition, consumers, energy efficiency and innovation at the EC's energy directorate, said.

"We are already putting a lot of emphasis on winter 2023/24. When we speak of demand reduction, it is already clear that we will probably need to prolong the efforts from member states to reduce demand," Pinho said during a webinar organized by European gas industry association Eurogas.