Serbia faces rising gas costs due to oil price surges

Serbia faces a significant increase in natural gas costs due to rising global oil prices and geopolitical tensions in the Persian Gulf. While the country is currently shielded from volatile exchange prices through its supply agreement with Gazprom, the contract utilizes an ‘oil formula’ linked to global oil price trends over the previous nine months. Because oil prices have risen sharply, Serbia is expected to pay approximately 60 percent more for gas, potentially adding 600 million euros to annual import costs.

There is additional uncertainty regarding the renewal of the three-month extension of this favorable arrangement. The continuation of the agreement is linked to certain unwritten obligations, including Serbia’s stance on sanctions against Russia, its munitions sales to Ukraine, and the maintenance of Russian ownership in NIS. If the Gazprom agreement is not renewed, Serbia would be forced to purchase gas at current market rates, which could increase annual costs to between 2.5 and 3 billion euros, compared to approximately 1 billion euros spent last year.

On a broader scale, European liquefied natural gas (LNG) prices have more than doubled compared to last year. European gas storage levels are currently at 65 percent capacity, falling below the long-term average of 80 percent. With the heating season approaching in Northern Europe, supply concerns may intensify if the upcoming winter proves colder than previous years.