Germany Expects Gas Prices to Stay High for Several Years

(Bloomberg) -- The German government expects gas prices to remain elevated until at least 2027, highlighting the need for additional emergency measures, according to a report approved by the Cabinet on Wednesday.

Forward prices at the end of June indicated that there may be an increase on wholesale markets to about €50 ($54.62) per megawatt-hour in the coming months, according to an analysis by the economy ministry. Expectations are normalizing and imply a return to pre-crisis levels within four years. The forecast chimes with estimates by Germany’s gas storage operators, which suggest a risk of gas shortages until early 2027.

Dutch front-month futures, Europe’s gas benchmark, were about €38.38 a megawatt-hour at 12:30 p.m. in Amsterdam. Dutch gas averaged about €19.40 in the period 2008 to June 2021. 

Europe’s industrial powerhouse was one of the nations worst hit by Russia’s curtailments of gas shipments last year, and it will continue to monitor developments on the markets in order to identify potential problems at an early stage, according to the report. Measures to reduce such risks include the expansion of renewable energies, LNG terminals and the establishment of a hydrogen infrastructure.

The government has so far paid €22.7 billion in power and gas subsidies to ease the burden for customers, but a final overview is only expected by the end of the year. Large industry customers have received €6.4 billion in state aid, according to the ministry.

©2023 Bloomberg L.P.