With gas storage levels at over 70% full across Europe, the region’s energy supply is once again “safe and stable”, according to Konstantinos Panitsas, an economist at the think tank The Conference Board Europe. “The energy crisis Europe experienced in the aftermath of the war in Ukraine is over,” he tells Energy Monitor. However, Europe’s dependence on imports puts the region at risk of future geopolitical disruption – a point brought into focus by recent Houthi attacks on oil tankers in the Red Sea.
The resolution to the energy crisis
Europe remains reliant on imports of crude oil, natural gas and refined products (especially diesel) for its energy needs. Until Russia's invasion of Ukraine in February 2022, Europe had largely relied on it for these supplies. However, sanctions imposed in response to the invasion meant that Europe was forced to diversify.
“Through a combination of supply diversification strategies – to rely less on Russian fossil fuels and minimise further disruptions in the future – and demand destruction, Europe has kept natural gas prices much contained,” explained Panitsas.
Natural gas was the most impacted resource and is critical in both residential and industrial sectors. Liquified natural gas (LNG) prices peaked in August 2022, with record highs of €236/MWh.
However, January 2024 saw prices averaging €30/MWh, nearing the average price of €18/MWh seen between 2015 and 2019.
The successful diversification of supplies, which saw an increase in imports of natural gas through Norwegian pipelines, was aided by a mild winter in 2023, along with slowing industry.
However, GlobalData analyst Ravindra Puranik cautions that the energy crisis could repeat itself: “There remains a possibility of the crisis resurfacing again in 2024 if winter turns out to be severe and Europe's suppliers are affected by geopolitical tensions or other issues.”
The potential for future crises
The delicate balance of supply and demand can be knocked off kilter by unexpectedly cold weather (creating a spike in demand), or by sudden reductions in supply availability caused by geopolitical tensions in supply areas.
"Being highly dependent on imports, Europe's energy security is at the mercy of other markets that may or may not prove to be reliable supply partners," says Puranik, explaining how other regions could prompt a European crisis.
Recent disruption to shipping routes caused by Houthi activity has demonstrated the potential impact of these concerns, causing a reduction in the volume of Middle Eastern crude oil reaching Europe. The number of barrels per day (BPD) reaching the region almost halved between October and December 2023, with Kpler data showing that October’s 1.07 million BPD had dropped to 570,000 BPD by December.
“The war in the Middle East is a real threat to watch closely as a possible escalation of the conflict could lead to fresh disruptions – not through natural gas – but oil this time,” says Panitsas.
“Another example is China’s dominance over Europe on rare earth minerals and solar energy – both critical for the rollout of green alternatives. Fresh trade barriers or wars between the two regions that could lead to new protectionist tactics from each side could hinder Europe’s green transition efforts in the future, thus prolonging the period of relying mostly on fossil fuels to cover its energy needs.”
