Beautiful Virgin Islands

Wednesday, Aug 27, 2025

Analysis: Europe is paying record prices for energy. A winter crisis looms

Analysis: Europe is paying record prices for energy. A winter crisis looms

Energy prices are skyrocketing, and as winter approaches, Europe is getting worried.

The wholesale cost of natural gas has surged to record highs in the United Kingdom, France, Spain, Germany and Italy. Bills for households and businesses are already soaring, and could go even higher as cold weather sets in and more fuel is needed for electricity generation and heating systems.

"We've seen huge price increases," said Dimitri Vergne, head of the energy team at The European Consumer Organization. "It's worrying ahead of the winter, when gas consumption will necessarily increase."

A complex web of factors is at play. A cold spring depleted natural gas inventories. Rebuilding stocks has been tough, thanks to an unexpected jump in demand as the economy bounces back from Covid-19 and a growing appetite for liquified natural gas (LNG) in China. Russia is also supplying less natural gas to the market than before the pandemic.

Meanwhile, other sources of power have been less readily available, with calm summer weather quieting North Sea wind farms, and countries ditching coal as pressure builds to tackle the climate crisis. Germany is also phasing out nuclear power by 2022.

The deteriorating situation is quickly transforming into a full-blown crisis. Spain has announced emergency measures to cut energy bills, while France plans to make one-time €100 ($117) payments to nearly 6 million lower-income households. In the United Kingdom — where natural gas spikes have already threatened to exacerbate food shortages — Prime Minister Boris Johnson's team is debating the extent to which it should offer state support. A UK price cap for consumers is being maintained, but that's helping to push small British energy companies out of business.

Industries across the region are seeing costs take off. Some British steelmakers have had to suspend operations, according to trade group UK Steel. Norway's Yara (YARIY), a fertilizer company, is cutting production of ammonia in Europe by around 40% because of the record high natural gas price.

"Right now, it's unprofitable to produce ammonia in Europe," said Yara CEO Svein Tore Holsether, noting that it costs $900 to produce a metric ton that sells for just $600. The company will temporarily rely on plants in other parts of the world to supply customers.

Storage tanks of liquified natural gas are seen at an import terminal in southeast England on Sept. 21.


The fallout could weigh on Europe's economy, while exacerbating fears about inflation at a delicate moment in the pandemic recovery.

"To the extent people are worried about the higher cost of energy, they may be inclined to hold back on spending," said Jessica Hinds, Europe economist at Capital Economics.

What's happening


The leap in natural gas prices can be traced back to a chilly spring. Cold weather through April and the beginning of May forced a drawdown in natural gas stocks during a period when demand typically eases.

"We started this whole process of putting gas away ... six weeks later than we normally would," said Tom Marzec-Manser, a natural gas analyst at market intelligence firm ICIS.

But the problems don't end there. China has also been outbidding Europe for LNG, which is preferred as a cleaner alternative to coal as the country tries to make its economy greener.

As a result, the price of power for next-day delivery in France jumped 149% between the beginning of August and Sept. 15, according to data from ICIS. In Germany, prices leaped 119%.


And in Britain, which operates a just-in-time market and doesn't have the same storage capacity as continental Europe, costs have surged 298%. Delayed maintenance work, as well as a fire that shut down a power cable that transmits electricity supplies from France, has piled on the pressure.

In this environment, European countries would typically turn to Russia, which meets about a third of the continent's natural gas needs. But supplies from Gazprom, the state-backed natural gas company, have been lower than usual. The International Energy Agency on Tuesday called on the country to open the taps.

"Although Russia is running production at very high levels, there are still fears it can't produce enough to satisfy Europe's very high demand," Wood Mackenzie analyst Graham Freedman said. "There are concerns there may not be enough gas in [Gazprom's] storage to get through the winter."

Marzec-Manser said it's hard to pin down exactly what's happening in Russia. There were some production problems over the summer, and the country is also experiencing higher domestic demand, he said. There are also theories that Moscow is intentionally supplying less than it could to encourage Germany to speed its approvals process for the controversial Nord Stream 2 Pipeline, which will transport natural gas directly from Russia into the European Union.

Norway, which supplies about 20% of the natural gas consumed in Europe, is trying to help fill the gap. Equinor, the state energy company, announced this week that it would increase exports starting in October. But in the near-term, experts warn pressure on prices is unlikely to ease.

Britain most exposed


Political leaders are trying to assuage fears that the public could go without power or heat as the temperature drops.

"We do not expect supply emergencies to occur this winter," Kwasi Kwarteng, the UK business secretary, told Parliament on Monday. "There is absolutely no question ... of the lights going out or people being unable to heat their homes."

But it's increasingly clear that the crisis will be costly, and could weigh on the region's economy while the effects of Covid-19 are still being felt.

The situation is particularly acute in the United Kingdom, where seven small energy providers — including Avro Energy, which supplied about 580,000 customers — have failed in recent weeks because their costs have soared. Dozens more are on the brink.

Other British industries are at risk, too. On Tuesday, the UK government said it had agreed to subsidize a major US fertilizer manufacturer at a cost of several million pounds to taxpayers in order to reopen factories that supply most of the carbon dioxide Britain's food supply chain needs.

CF Industries (CF) decided last week to halt operations at its UK fertilizer plants because soaring natural gas prices had made them unprofitable. CO2 is used to stun animals for slaughter, as well as in packaging to extend the shelf life of fresh, chilled and baked goods.

A fertilizer factory in Ince, United Kingdom, one of two shut down by CF Industries because of high natural gas prices.


"I do not see people freezing," said Michael Grubb, a professor of energy and climate change at University College London. "I do see unenviable choices, between a lot of companies going bust and who picks up the tab."

The Confederation of British Industry, a UK business lobby group, emphasized Wednesday that "significant" price rises hit both businesses and consumers.

"It's essential vulnerable customers and key energy intensive companies, which underpin critical UK supply chains, are well supported throughout the winter," Matthew Fell, the chief policy director, said in a statement.

A lot rides on the weather. Henning Gloystein, director of the energy, climate and resources practice at Eurasia Group, thinks that if the next few months yield particularly cold weather, there could be further pressure on certain industries to reduce consumption of natural gas to prioritize supplies to households.

"If it gets cold this winter, [supplies] could get really tight," he said. "Politically, that's really toxic."

Governments will do what they can to shield consumers from rising prices, Gloystein continued, noting that price caps and subsidies are likely to persist. But economists are already revising their inflation expectations for the coming months, cautioning that natural gas shortages will only make price increases triggered by rising demand and ongoing supply chain problems worse.

Prices for CO2 paid by the UK food industry, for example, will go up despite the temporary subsidy to CF Industries. To what extent that gets passed on down the chain to supermarket shelves remains to be seen.

"At the moment, it definitely seems likely we'll be seeing higher inflation in the short term," Hinds of Capital Economics said. "And this is probably going to run into next year."

She predicted that a previous estimate of headline inflation of 3.5% for Europe in the final months of 2021 could rise to 4%.

"Gas prices could push inflation further above [the] 2% [target] for longer," Bank of America analysts said in a recent note to clients.

Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Spotify’s Strange Move: The Feature Nobody Asked For – Returns
Manhunt in Australia: Armed Anti-Government Suspect Kills Police Officers Sent to Arrest Him
China Launches World’s Most Powerful Neutrino Detector
How Beijing-Linked Networks Shape Elections in New York City
Ukrainian Refugee Iryna Zarutska Fled War To US, Stabbed To Death
Elon Musk Sues Apple and OpenAI Over Alleged App Store Monopoly
2 Australian Police Shot Dead In Encounter In Rural Victoria State
Vietnam Evacuates Hundreds of Thousands as Typhoon Kajiki Strikes; China’s Sanya Shuts Down
UK Government Delays Decision on China’s Proposed London Embassy Amid Concerns Over Redacted Plans
A 150-Year Tradition to Be Abolished? Uproar Over the Popular Central Park Attraction
A new faith called Robotheism claims artificial intelligence isn’t just smart but actually God itself
Deputy Prime Minister Angela Rayner Purchases Third Property Amid Housing Tax Reforms Debate
HSBC Switzerland Ends Relationships with Over 1,000 Clients from Saudi Arabia, Lebanon, Qatar, and Egypt
Sharia Law Made Legally Binding in Austria Despite Warnings Over 'Incompatible' Values
Italian Facebook Group Sharing Intimate Images Without Consent Shut Down Amid Police Investigation
Dutch Foreign Minister Resigns Amid Deadlock Over Israel Sanctions
Trump and Allies Send Messages of Support to Ukraine on Independence Day Amid Ongoing Conflict
China Reels as Telegram Chat Group Shares Hidden-Camera Footage of Women and Children
Sam Nicoresti becomes first transgender comedian to win Edinburgh Comedy Award
Builders uncover historic human remains in Lancashire house renovation
Australia Wants to Tax Your Empty Bedrooms
MotoGP Cameraman Narrowly Avoids Pedro Acosta Crash at Hungarian Grand Prix
FBI Investigates John Bolton Over Classified Documents in High-Profile Raids
Report reveals OpenAI pitched national ChatGPT Plus subscription to UK ministers
Labour set to freeze income tax thresholds in long-term 'stealth' tax raid
Coca‑Cola explores sale of Costa coffee chain
Trial hears dog walker was chased and fatally stabbed by trio
Restaurateur resigns from government hospitality council over tax criticism
Spanish City funfair shut after serious ride injury
Suspected arson at Ilford restaurant leaves three in critical condition
Tottenham beat Manchester City to go top of Premier League
Bank holiday heatwave to hit 30°C before remnants of Hurricane Erin arrive
UK to deploy immigration advisers to West Africa to block fake visas
Nurse who raped woman continued working for a year despite police alert
Drought forces closures of England’s canal routes, canceling boat holidays
Sweet tooth scents: food-inspired perfumes surge as weight-loss drugs suppress appetites
Experts warn Britain dangerously reliant on imported food
Family of Notting Hill Carnival murder victim call event unmanageable
Bunkers, Billions and Apocalypse: The Secret Compounds of Zuckerberg and the Tech Giants
Ukraine Declares De Facto War on Hungary and Slovakia with Terror Drone Strikes on Their Gas Lifeline
Animated K-pop Musical ‘KPop Demon Hunters’ Becomes Netflix’s Most-Watched Original Animated Film
New York Appeals Court Voids Nearly $500 Million Civil Fraud Penalty Against Trump While Upholding Fraud Liability
Elon Musk tweeted, “Europe is dying”
Far-Right Activist Convicted of Incitement Changes Gender and Demands: "Send Me to a Women’s Prison" | The Storm in Germany
Hungary Criticizes Ukraine: "Violating Our Sovereignty"
Will this be the first country to return to negative interest rates?
Child-free hotels spark controversy
North Korea is where this 95-year-old wants to die. South Korea won’t let him go. Is this our ally or a human rights enemy?
Hong Kong Launches Regulatory Regime and Trials for HKD-Backed Stablecoins
China rehearses September 3 Victory Day parade as imagery points to ‘loyal wingman’ FH-97 family presence
×