A new report by ING Bank suggests that European gas prices are unlikely to return to the record highs seen in 2022 when the region faced severe disruptions after the early phase of the Russia-Ukraine conflict. The analysis notes that Europe is now structurally stronger and better supplied to absorb shocks. "We do not believe European gas prices will trade to the peaks seen in 2022; global gas markets are relatively better supplied, while a large pipeline of LNG export capacity is coming onto the market in the years ahead," the bank stated.
Despite improved supply conditions, the report highlighted that natural gas continues to determine electricity costs under Europe's marginal pricing system. Since the costliest fuel sets the electricity tariff, even modest increases in gas prices can lift power bills across the region.
Renewables surge under REPowerEU push
The report credited accelerated investments in clean energy for Europe's improved resilience. Installed solar and wind capacity grew by 57 per cent from 2021 to 2024 and is projected to rise by another 15 per cent in 2025. This expansion is backed by the European Commission’s REPowerEU strategy designed to cut dependence on Russian fossil fuels. Notably, European gas demand remains 16 per cent below pre-crisis levels recorded during 2017 to 2021. ING attributes this decline to long-term structural shifts and demand destruction following the 2022 energy shock when industries and households drastically reduced consumption.
Global LNG capacity on track to expand
According to the report, LNG supply constraints will ease in the coming years. While only about 25 bcm of new capacity was added globally between 2021 and 2023, a much larger wave of export capacity is currently under development and expected to enter the market soon.
Lessons from 2022 drive smoother market functioning
Europe has also adapted its purchasing behaviour. During the volatile months of 2022, buyers scrambled for storage, injecting around 70 bcm of gas compared to the usual 55 bcm between 2017 and 2021. Joint gas-buying mechanisms introduced since then are expected to prevent internal bidding wars that previously inflated prices. The report adds that 2022 was uniquely challenging due to multiple simultaneous shocks, including reduced Russian pipeline flows, lower nuclear output in France and weaker hydropower generation. With diversified sources, stronger storage strategies and expanding renewables, Europe is now considered far better prepared for potential disruptions.
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