After Putin’s decision to invade Ukraine natural gas it is the single most important engine of Europe’s economic well-being. Without the sharp decline in Russian gas exports, Europe would likely be showing above-average growth rates now amid recovery from the coronavirus pandemic, rather than suffering near-stagnation. However, the Europeans managed to avoid the worst outcome: that is, an immediate shortage of gas, requiring forced shutdowns, which would have hurt the economy. Based on our October 2022 forecast, and with much of the 2022-2023 winter behind, natural gas reserves in the EU will be exhausted. remains at a relatively comfortable level.

In our baseline EU scenario, it is going to survive next winter as well. For this scenario, we assume the following: 1) supplies from Russia remain at current low levels, 2) temperatures remain at seasonal averages, 3) natural gas consumption remains 20% below the 2017-2021 seasonal average, 4) domestic production natural gas unchanged; and 5) imports from countries outside of Russia remain on average over the past six months.

This does not mean that Europe should be complacent: while the baseline looks fairly benign given the conditions, its natural gas supplies are subject to a number of risks, such as a complete cut-off of supplies from Russia, a harsh winter, and, in addition, European companies and households have eased their efforts to savings. Losing the rest of the gas flows from Russia wouldn’t hurt too much, as it now accounts for less than 9% of EU imports. against 40%-50% before. Relatively warm weather has made it easier for Europeans to save gas in 2022. But our data shows that Europe could face a relatively cold winter in 2023-24 even without Russian gas supplies. However, the gas flow is uneven. Data for Germany (available through Feb. 11) shows that savings efforts may have recently dropped to 13% temperature-adjusted, while savings in Europe are as high as 20% in our base case. In the worst-case scenario, a multi-factor scheme with no supplies from Russia at freezing temperatures and with savings of only 10%, the EU will be at risk of shortages in the winter of 2023-2024.

* Mr. Salomon Fiedler is an economist at Berenberg Bank.