Europe gas crisis hinges on cold, high prices luring supply

FRANKFURT, Germany (AP) — Europe’s natural gas crisis isn't letting up. Reserves are low. Prices are high. Utility customers are getting hit with higher bills. Major Russian supplier Gazprom isn't selling gas like it used to.

It all raises the question: How exactly is Europe, which imports most of its energy, going to make it through the winter without a gas disaster, especially if the season turns out to be colder or longer than usual?

Here's how the European Union, home to 447 million people, will try to deal with the crisis:

THE PROBLEM IS LOW STORAGE LEVELS: Utilities turn to gas stored in underground caverns to handle sudden additional demand for gas for heating or electricity. But Europe started 2020 with gas storage only 56% full, compared with 73% a year earlier. The reasons vary: cold weather last winter, lack of Russian deliveries on the spot market and robust demand in Asia for liquid natural gas that comes by ship. Europe's association of pipeline operators says cold weather would mean needing to import 5% to 10% more gas than the maximum volumes observed in recent years to avoid the risk of shutoffs.

AS A RESULT, GAS PRICES HAVE SOARED: The benchmark price in Europe is around 80 euros per megawatt hour, more than four times its level of 19 euros at the start of 2021 and up from as low as 4 euros in 2020. Prices have eased from as much as nine times their level at the start of last year. That price shock is feeding through to utility bills, alarming consumers and politicians.

EUROPE IS RELYING ON HIGH PRICES ATTRACTING MORE SUPPLY: Analysts at Rystad Energy used ship-tracking data last month to watch 11 tankers bringing liquid natural gas, or LNG, to Asia make U-turns in the middle of the ocean to take advantage of lucrative sales in Europe. With prices so high, traders were tempted to divert cargoes to...