Europe faces energy supply risks as gas reserves remain low

Europe is facing significant energy concerns as natural gas reserves remain exceptionally low heading into the winter season. EU Commissioner for Energy Dan Jørgensen has warned that storage levels are critically low, leaving little margin for supply disruptions. This vulnerability is compounded by geopolitical tensions in the Middle East, which have impacted liquefied natural gas flows through the Strait of Hormuz.

In Germany, rising fuel and energy costs are expected to drive inflation above 3 percent in September, the highest level since late 2023. The Ifo Institute reports that companies are increasingly passing higher energy costs onto consumers. While the German government plans to implement a fuel tax reduction from October to provide relief for drivers, economic institutes predict that inflation will remain elevated in the medium term, potentially reaching 3.2 percent by 2027.

To compensate for expensive gas, there is an increasing reliance on coal-fired power generation across Europe. In Germany, coal plants are being utilized more frequently to meet electricity demand during periods of low renewable output, despite long-term decarbonization goals.