Germany’s gas storage facilities are full to the brim, we use much less natural gas than in previous years and the weather so far has been mild for the time of year. It is possible that the entire winter will be warmer than expected. That would bring us benefits worth billions.
When Russia began to throttle deliveries via Nord Stream 1 in June and later stopped them altogether, a slight panic broke out in Germany. Without natural gas from Russia, would we have enough energy to heat our homes in winter? Who would turn off the gas first? As the federal government forged a “gas emergency plan,” consumers rushed to hardware stores and over-bought electric fan heaters. And because fear is also a bad advisor on the stock exchanges, gas prices on the Dutch trading point TTF shot up. It rose from 82 euros per megawatt hour at the beginning of June to 339 euros at the end of August – an increase of more than 300 percent.
In the meantime, the situation has eased considerably. Germany’s gas plan has worked to the extent that the gas storage facilities have been 100 percent full since Wednesday. That was only planned for December 1st, and anyway it is 10 percent higher than the average for the past five years. Consumption is just as good: According to the Federal Network Agency, industry, commerce and private households consumed 12 percent less gas by the end of October than on average over the past four years. This is of course also due to the high prices and the partly uncertain supply situation, but it also helps with future supply.
At least that is secured for this winter. But economists have legitimate concerns about the next one. It can be assumed that the Russian deliveries will fail completely in 2023. The gas storage facilities would then have to be filled entirely from alternative sources. This is possible, but will probably be expensive. In such a case, analysts from the financial news agency Bloomberg expect a gas price of permanently 200 euros per megawatt hour. That would be twice what it is now and about 20 times what it was before the energy crisis.
Such prices would be very expensive for companies and households, and the state would probably have to intervene with further relief packages. Bloomberg estimates that in this baseline scenario, around five percent of gross domestic product would be due just for gas purchases. That would be around 190 billion euros in Germany. In this scenario, inflation would remain high and the economy would likely slide into recession as early as winter. Bloomberg assumes that the entire EU would then record a 0.1 percent fall in GDP in 2023.
The weather also plays a major role. The harder the winter gets, the more gas has to be consumed from the storage tanks and the more natural gas has to be refilled there in the coming year. In its current scenarios, the Federal Network Agency assumes that the storage volumes will definitely last until the end of February. Even in scenarios of a normally cold winter, the gas will either last until the end of April or the storage levels will even be 50 percent at the end of the winter.
The German gas storage association INES also assumes that there is a very high probability that Germany will get through the winter without a gas shortage – and that it will be able to fill its storage facilities again by winter 2023. According to the models published on Friday, a gas shortage cannot be completely ruled out if the Federal Republic experiences a historically cold winter. In view of the current weather forecasts, however, this scenario is very unlikely.
In fact, Germany is experiencing a mild autumn. October was already the third warmest since climate records began, and November is unlikely to lag behind. It is therefore quite possible that the coming months will also be comparatively mild and that households will therefore have to heat much less than previously thought.
That would have a huge impact on the state coffers as well as on your personal wallet. In the best-case scenario, which also includes the planned commissioning of the LNG terminals on the German North Sea coast, Bloomberg only calculates with an average price of 100 euros per megawatt hour of gas. That would correspond to the current course, so the price would not rise any further. Under these circumstances, the reservoirs would not even come close to being depleted. Accordingly, the federal government would only have to spend 2.3 percent of GDP on purchases in 2023 – that would be 100 billion euros less than in the base scenario.
Even better: In this scenario, the economy could also supply itself with natural gas more cheaply and consumers would have to spend less on it, which is reflected in more money for private consumption. Across the EU, a 0.1 percent economic contraction would result in 1.1 percent economic growth. Converting this into concrete figures would also mean 46 billion euros more GDP in Germany.
But it would have even more far-reaching consequences: if energy prices fell permanently to 100 euros per megawatt hour, the inflation rate would flatten out more in 2023 than previously expected. That would also make all other prices more bearable, and at the same time significant salary increases are to be expected in the coming year. Under these circumstances, the ECB would not have to raise interest rates any further, which in turn would allow easier lending, which in turn would further stimulate the economy.
So a mild winter would bring us a lot of benefits. However, that should not hide the fact that the times before the energy crisis are not a return. The money you’ve already lost to high inflation is gone and won’t come back. Wage increases will not make up for this loss for years to come. And 100 euros per megawatt hour is still almost ten times as much as two years ago. But it would be lucky in disguise.
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