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At the Munich Security Conference, which begins Friday and brings together heads of state, diplomats and business leaders, high on the agenda is how Russia’s “weaponization of energy has ushered in a global energy crisis.” But the feeling in Germany and elsewhere is that Western Europe may have avoided the worst-case economic scenario, the DealBook newsletter notes, thanks to a dramatic fall in energy prices, led by natural gas, that began in late summer.
On Friday, the European benchmark price of gas fell below 50 euros ($53) per megawatt-hour for the first time since late 2021. Prices had spiked above €300 per megawatt-hour in mid-2022, as Russia curtailed gas exports to Europe after its invasion of Ukraine.
“Without the sharp reduction in Russian gas deliveries, Europe would now likely be enjoying above-average growth rates due to the post-Covid-19 rebound, instead of suffering near stagnation,” Salomon Fiedler, an economist at Berenberg Bank, wrote in a research note. “But at least Europeans have been able to avoid the worst outcome: outright gas shortages necessitating forced cutoffs, which would wreak havoc on the economy.”
Efforts to conserve energy and bolster storage, as well as relatively mild winter weather, have allowed European countries to build sufficient gas reserves “to get through next winter as well,” Mr. Fiedler estimated.
That calculation assumed continued conservation efforts, normal temperatures and energy imports from countries other than Russia — like liquid natural gas from the United States — remained at a brisk pace. A big risk to the scenario is China: If China’s demand for L.N.G. rockets higher, amid a broader reopening of its economy, it could disrupt the global energy market.