Running on empty – is Europe running out of gas? (Spoiler alert: not yet, but maybe soon)

There is a lazy habit in European energy policy of describing every turning point as “a structural change.” Usually, they aren’t. They are typically just incremental shifts and variations around existing systems. But gas in Europe right now genuinely feels like one of those moments where the structure has changed. Like Dorothy in the Wizard of Oz, unexpected events have suddenly put us in a very different place.  

The essence of this blog is that the format of European gas supply has changed from pipelines to ships. We are now competing on a global scale. Europe is no longer filling up its gas storage in the summer because the price is too high, and every year the situation is getting worse. Biomethane makes a slight difference, but “slight” is a smaller word than “big”. One cold winter’s day, this issue is going to bite.

The big picture: What happened to Russian gas?

Before 2022, the EU consumed roughly 400 bcm of gas a year. Russia supplied somewhere between 155 and 180 bcm of that total through various pipelines: Nord Stream, Yamal-Europe, Brotherhood and the TurkStream extensions. This gas that arrived at a more-or-less constant rate, day in, day out, with the seasonal swing handled by storage. It was predictable, boring, and not really the subject for a blog.

Today, the picture is very different. EU consumption has fallen to around 330 bcm through demand destruction, partly through efficiency, and partly because some industry simply isn’t coming back. Pipeline imports from Russia have collapsed to a rump. The Ukrainian transit route shut at the end of 2024, leaving only TurkStream to deliver Russian molecules to the EU. In this new world, our gas comes from Norway, the US, or the Middle East, and a significant portion arrives in ships rather than via pipes. We will talk about the long-term implications of this shift a bit further down.

Although Russia is largely out of the European picture, it may be creeping back in at the edges as politicians start to fret about the 40% leap in gas prices so far this year. There is tentative talk of ‘easing’ sanctions, and presumably, this news is going down better in Moscow than in Kyiv.

The problem with storage

Because of seasonal variation in demand, we store a lot of gas. Gas supply is fairly constant, but gas demand is highly seasonal, meaning we must use the summer months to top up. In the halcyon days before the conflicts in Ukraine and Iran, the seasonal rhythm was fairly stable. We would end the winter with 35–45 bcm left in storage, meaning the refill light was on but not flashing. We would refill with 55–60 bcm and go into the chilly autumn season with the tanks 90 – 95% full. It was simple and nothing to worry about.

But there is a catch. Two things are quietly happening under the surface.

1. Gas demand in recent winters has been higher than expected, meaning we have ended the winter with slightly less than the previous year. This year, the tanks only contained 30 bcm, which quietly pushes the refill requirement up to 60–70 bcm per year. Before accounting for geopolitics, pricing, or Asian demand, Europe is already trying to find an extra 10–20 bcm compared to its old “normal”
2. The second issue is that we are not injecting enough. Storage was around 34% full in early May 2026, with roughly 6–7 bcm injected so far this season. Because we started 2026 with less in the tank, we need 60–70 bcm injected before the autumn. This requires~330–400 mcm/day every day for months, yet we are only managing 200 mcm/day.

The reason for this is price.  

Normally, the forward gas curve is in contango. This is not a Latin dance, but a scenario where winter contracts trade above summer contracts because gas is more valuable in winter when you actually need it. That price spread provides the economic incentive to store in summer and withdraw in winter. It sounds simple, but it only works if there is a significant arbitrage between summer and winter prices.

The required seasonal price spread is EUR 5–15/MWh. This year, however, it has been as low as EUR 0–5/MWh, and sometimes the market flips into a new world for most of us: backwardation (this is a great Scrabble word if your brother-in-law has already put down “backward”).  

Backwardation occurs when current summer prices are more expensive than forecast winter ones, meaning nobody wants to store. Because of this, we are not filling the tanks at the required rate. Every day we fall short, we need to put even more in the next day. 

So, what has changed?

The first big difference is that, as we said above, we used to buy a lot of Russian gas that came from a pipeline, and now we buy a lot of US LNG that comes from a ship.

That sounds fine until you think about what it actually means. A pipeline is a continuous, deterministic flow. An LNG cargo is about 0.09–0.10 bcm of gas inside a steel hull that has to physically arrive on a particular tide, get regasified, and be pushed into the grid.

This is the detail the headlines keep missing. We didn’t just swap one supplier for another; we swapped a flow from a pipe for a schedule of ships. Ships, by definition, are a lot more mobile than pipes, meaning they can take that LNG to whoever is willing to pay the most.

Consequently, we are now competing directly with Asia to attract these ships. If there is a hot summer in China (requiring more gas for air conditioning) or a cold winter in Japan, the price spikes and the captain of our LNG ship metaphorically and literally changes course. Although gas is relatively marginal in the Chinese energy mix, a hot day can add 30 – 30 mcm of demand per day, taking a massive chunk out of the European 400 mcm daily refill requirement.  

To put this in context, 10 bcm of gas is roughly 100 cargo ships. We need 1,500 – 1,700 ships to come to Europe every year, but they can now go to whoever pays more. Suddenly, we are competing in a global auction, whereas previously we only had to deal with the Russians.

Before we turned off the pipes, our Russian friends supplied 150 bcm/year of gas at peak. Because it was a physical pipe and not a ship, we could adjust flows seasonally, store under pressure in the system (another new word, “line packing”), and act as a balancing lever in tight markets

All of that is gone. We have replaced it with a combination of Norwegian gas and US LNG, shifting fundamentally from a controllable pipe-based system to a competitive, mobile one. This is problem number one, and it is partly why the markets have moved from contango to backwardation.

Iran, the Strait of Hormuz, and Ras Laffan

Problem number two is that little stretch of sea along the coast of Iran. As you will have seen in the news, roughly 20% of global LNG flows pass through or near the Strait of Hormuz. Shutting the Strait for even a few weeks can remove 10–15 bcm from the global supply chain, just as we are starting to replenish our tanks. Remember, we need 60 – 70 bcm in 2026, so 10 – 15 is a meaningful chunk of our summer replenishment.

To make it worse, Qatar’s Ras Laffan liquefaction complex has been damaged in the same conflict. Gloomy industry estimates suggest around 17% of Qatari liquefaction capacity will be offline for three to five years. Qatar was supposed to be the balancing force underwriting Europe’s LNG bet, but now the maths no longer quite adds up.

Predictably, this is feeding through into prices. The Dutch TTF price was at one point nearly double the pre-war level and remains 30% above normal, even during these low-demand summer months. What the price will be during the cold winter is anybody’s guess.

What about biomethane?

Biomethane often gets mentioned as part of Europe’s gas replacement story. While production is growing, the scale remains modest. Current production sits at 4–6 bcm/year and could grow to 20–30 bcm/year by 2030. So, at best, it meets 10% of our current refill needs, though it could get to 50% if we build a significant number of biomethane plants. This is precisely why we need to do exactly that.

And the impact of demand destruction?

On a positive note, the response to the Ukraine crisis triggered a major shift away from gas towards electricity. Gas consumption in Europe is roughly 80 – 100 bcm lower than it was pre-2021. However, in the first seven months of 2025, EU gas demand rebounded by about 5%. Some of that is weather-driven, some of it is industry tentatively returning to gas, and some of it is the power sector switching to gas as coal exits the mix.

In summary, that little light is still flashing

This blog can be condensed as follows

• We used to rely on Russian pipelines; now we rely on the US ships and must compete on a global scale for molecules
• We are starting every year with less gas in storage, creating an opening deficit of 10–20 bcm compared to the old ‘normal’
• We need to put at least 60 – 70 bcm of gas into storage in 2026 before the winter
• The current injection pace in May 2026 is 200–300 mcm/day, which is well below the required rate. This is alarming in May; it could become catastrophic in December
• Biomethane contributes, but it only provides 4–6 bcm today. We need to build a lot more plants to fundamentally change the market structure
• Ships have that annoying habit of moving around, so now we have to worry about Chinese air conditioning and Japanese winters impacting our gas prices. We never used to care about this stuff, but now we do
• The gas price has gone up by 40% this year, despite the weather getting warmer, rather than colder
• Because of this increase, we all learnt a new word, “backwardation”, where summer actual prices are higher than winter forecasts, so nobody wants to store. This is the opposite of contango and is not a good thing

• If we hadn’t seen a 100 bcm reduction in demand for gas since 2022, we would be in a much worse place, but we did, and so we’re not. However, demand is creeping up again

• We also learnt that line packing means storing gas under pressure in pipelines, and not a tactical play in American football
• We really need the Strait of Hormuz to reopen soon; otherwise, this seemingly innocuous issue is going to get much bigger prominence in our lives  

I won’t divorce my wife just because she won’t put petrol in the car. I will just get mildly annoyed every time I see that petrol pump light, have to turn the volume on the radio down, and retune it back to Radio 4. Similarly, Europe probably won’t run out of gas this winter, but it may get very uncomfortable in the autumn if the weather turns cold and the Strait is still closed. Either way, it means we will start 2027 with less in the system, compounding the problem.

At the current refill rate, we face either periods of very high prices on cold days, as Europe competes to outbid Asian buyers for those annoyingly mobile LNG cargoes, or the politically difficult prospect of temporary demand curtailment. In plain terms, this means turning down the heating and having no hot showers in February.

The structure of the European gas market has fundamentally changed because of events entirely outside of our control. Suddenly, we are no longer the monopoly buyer at the end of a Russian pipe. We are just another bidder for LNG ships, several of which are currently stuck in the Strait. Things are very different now; like Dorothy and little Toto, we are not in Kansas anymore.