Europe and US gas markets are separated by Atlantic and show (almost) ocean wide gap in prices. In this post I compare EU TTF and US NATGAS prices from 2020 till today. Since gas market shows seasonality we look at 4 months window starting Nov 1st (Nov-Feb). TTF quotes price in EUR/MWh, while NATGAS in USD/MMBTU, the latter was converted to EUR/MWh using EURUSD daily close rates, 1MMBTU=0.293071MWh.
War on Ukraine impact
Figure below compares TTF and NATGAS prices side to side using exactly the same scale. War on Ukraine started 24 Feb 2022, but EU gas market sensed it already in 2021. This of course is due to share of gas imported from Russia on European market.
Periods are marked with starting year, 2021 means Nov 2021 to Feb 2022. In Nov 2020 TTF gas price was below 25 EUR/MWh, year later it jumped to 75 and shoot to 175 in mid December 2021. Part of this effect was due to delayed refilling of gas storage which caused a kind of squeeze on market. Companies were waiting for price drop, until they were forced to buy gas before winter heating season pushing price even higher. Discussion on how war impacted gas prices can be found here, 2022 high was around 350 EUR/MWh. Unlike EU US market gas price stayed relatively stable.
Failed cheap gas quest
After war start EU countries tried to renounce Russian gas from supply. Alternative to Russian pipeline gas was liquefied natural gas (LNG). It required new contracts and transport facilities like terminals. Figures below shows replacement gas turned out to be more expensive.
Trend is concerning , 2023 curve dropped almost to pre war 2020 level, but 2024 one moves in wrong direction, price grows instead of dropping. Factors like discontinuation of Russian gas transit via Ukraine to Slovakia, Hungary and Austria may contribute to this phenomenon. EU sanctions on Russian gas were not amounting to total ban, allowed exceptions were supposed to be eliminated over time. Sanctions were focused on pipeline gas, LNG imports (with some restrictions) were allowed. Assuming gas sanctions reduce amount of imported Russian gas we can conclude replacement gas is more expensive.
Gas is commonly used both as energy source and raw material. Production of fertilizers is one of industries using gas as raw material. Expensive gas makes fertilizers expensive, grows agriculture cost, pushes food prices up. Elevated gas price means additional cost for consumers and enterprises. The latter become less competitive and may be forced to relocate or go out of business. Gas sanctions hurt Russia, but Europe suffers too, while US is free of expensive gas problem.
EU to US gas price ratio
Below figures show how absolute and relative gas prices changed. US gas was always cheaper than EU. Before Ukraine war TTF/NATGAS ratio was 2.2, now it almost doubled to 4.2. Reason is clear: US gas price is almost the same, while EU doubled.
Divergence between US nad EU gas prices is explained by supply chain change. US relies on own sources while EU tries to replace Russian gas and its replacement is not coming cheap.
Conclusion
After after 3 years of war on Ukraine, end of Feb 2025, gas prices in EU are around 50 EUR/MWh, more than double pre war level. Sanctions on Russian gas are hurting EU too. EU Commission focus should be placed on finding cheaper gas supplies, not on developing further sanctions. Impact analysis on EU gas market and economy has to be performed before new sanctions slap.