Europe’s benchmark price of natural gas sank to €35.20 per megawatt-hour on 5 May, its lowest since July 2021 when Russia first began cutting back its gas exports to the continent.

The 5 May low was about a tenth the price at its peak of €345 in March 2022, days after Russia invaded Ukraine.

To offset the nearly complete loss of Russia’s gas, the European Union and its national governments successfully lined up alternative sources, including liquefied natural gas (LNG) from the U.S.

The European Union also sped the adoption of alternative energy technologies and extended the life of coal and nuclear plants due to be mothballed. 

In addition, the region benefited from an unusually mild winter that kept large amounts of gas in storage instead of being tapped.

“We got through this because we got a mild winter and Chinese demand [for LNG] was down,” James Watson, secretary-general of the trade group Eurogas, told the Financial Times. “It’s luck.” 

The continent will now be able to top up its gas reserves to 100 percent before next winter, even if Russia cuts off the remaining trickle of gas it ships to Europe, Morgan Stanley analyst Martijn Rats wrote in a note.

With gas reservoirs already 60 percent full, “there is not enough room in Europe’s storage capacity” to accommodate the shipments of liquefied natural gas it already has booked, he added.

Storage was barely half that—35 percent—at the end of last winter, he noted.

The fall in energy prices has eased Europe’s inflation rate, allowing the European Central Bank to raise its key rate by a quarter point last week instead of the half-point that characterized its previous six rate hikes.

The gas price remains more than twice the €15 average in 2019 and well above the pre-Ukraine war peak of €29.17, when inflation is factored in.

TRENDPOST: The loss of Russia’s gas has prompted Europe to speed its adoption of renewable power sources and tap gas reserves in other countries. But it will be a long time coming. And as we reported, should there be a cold winter next year, the Europeans will pay the price. 

There’s a lesson here for the U.S., which has wielded its dollar and the Western system of international finance to punish Russia for its attack on Ukraine. As a result, central banks are hoarding gold instead of dollars and China’s yuan is making strides against the dollar in world trade.