EU Agrees on 15% Gas Demand Reduction After Struggles... Gas Prices Soar

15% Reduction from Next Month to March Next Year
Gas Prices Up 21% Amid Concerns over Further Russian Gas Supply Cuts

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] The European Union (EU) member states announced that they have agreed on a plan to reduce gas consumption in response to Russia's threat to cut gas supplies. Natural gas prices in Europe, where the supply crisis has intensified, have surged sharply. With heating gas demand expected to spike from September and Russia's pressure to reduce gas supplies intensifying, the gas supply and demand situation has become critical. Although EU countries can manage with stored gas until this winter, concerns are rising that a gas crisis may occur starting next winter.

According to CNN on the 26th (local time), the energy ministers of the 27 EU member states held a meeting at the EU headquarters in Brussels, Belgium, and announced the final approval of the gas consumption reduction plan previously proposed by the EU Commission. Ursula von der Leyen, President of the EU Commission, issued a statement emphasizing, "Today, the EU has taken decisive action to confront Russia's comprehensive gas threat."

Under this reduction plan, EU member states must reduce gas consumption by 15% compared to the average consumption over the past five years from next month until the end of March next year. Initially, member states will undertake voluntary reductions, and in the event of a gas supply emergency, mandatory reductions will be applied as agreed.

There are concerns that if Russia further reduces natural gas supplies, the 15% reduction plan may not be sufficient. Eamon Ryan, Ireland's Minister for the Environment, expressed concern, stating, "Considering Russia's announcement to reduce gas supplies to about 20% of the current level, a 15% reduction may not be enough."

As a result, concerns about the implementation of gas rationing systems in various countries during the winter, when gas demand increases, have grown, causing European natural gas prices to soar. On this day, the Dutch TTF exchange, a major indicator of European natural gas prices, saw natural gas futures prices surge by 21.17% compared to the previous session, reaching 214 euros per megawatt-hour (MWh). This is the highest level in over four months since early March.

There are also concerns that if Russia's invasion of Ukraine prolongs into next year, Europe's gas crisis will fully begin. The UK Guardian reported, "Currently, the gas storage level across all EU member states is about 66% of total capacity, so gas supply can be maintained until this winter. However, from next spring, it will be difficult to secure replacement gas stocks, and the gas crisis could significantly worsen next winter."