New Delhi [India], March 24 (ANI): European gas prices are unlikely to surge to the extreme levels seen in 2022, as the region is now better positioned to handle energy shocks compared to the early phase of the Russia-Ukraine conflict, according to a report by ING Bank.

The report stated, '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.'

It noted that despite the relatively improved supply outlook, natural gas continues to play a critical role in electricity pricing in Europe. Under the marginal pricing system, the most expensive source of power, usually natural gas, sets the electricity price. As a result, even moderate increases in gas prices can still lead to a surge in electricity costs.

The report highlighted that Europe has significantly expanded its renewable energy capacity since the 2022 crisis. Installed solar and wind capacity surged by 57 per cent between 2021 and 2024, with estimates suggesting a further 15 per cent increase in 2025.

This growth has been supported by the European Commission's REPowerEU plan aimed at reducing dependence on Russian fossil fuels.

On the demand side, the report noted that Europe has reduced its reliance on natural gas. Gas demand remains 16 per cent below the levels seen during 2017-21, reflecting structural changes and demand destruction following the 2022 energy crisis.

The report also pointed to a significant expansion in global LNG supply capacity. Between 2021 and 2023, only around 25 bcm of new capacity was added, but a larger pipeline of LNG export capacity is now expected in the coming years, easing supply constraints.

It further noted that Europe has learned key lessons from the 2022 crisis. During that period, buyers rushed to secure gas supplies at any cost, leading to net injections of around 70 bcm in 2022 compared to an average of 55 bcm between 2017 and 2021 to meet storage targets.

The report added that joint gas purchasing mechanisms introduced in Europe are expected to reduce internal competition among buyers, which had previously driven prices higher.

Additionally, the report highlighted that in 2022, Europe faced multiple challenges simultaneously, including reduced Russian gas flows, lower nuclear output in France--down 30 per cent from the 20-year average--and weaker hydro power generation, forcing greater reliance on gas.

So the report suggested that while risks remain, Europe is now structurally better prepared to manage energy disruptions compared to 2022. (ANI)