Germany’s economy is facing a challenging winter, with severe weather conditions threatening to undermine its fragile economic recovery. The country’s extremely low gas reserves make it vulnerable to price spikes.
The current storage rate is at 51 percent, the lowest for this season since records began in 2009, and well below the target of 70 percent set for November.
Chancellor Friedrich Merz’s main concern is the alarming level of gas reserves. Experts warn that importing liquefied natural gas (LNG) during the winter peak is too slow to compensate for these deficits, making the country vulnerable in case of a surge in demand.
The risk of energy price volatility is high, as Germany has abandoned coal and nuclear power, and now relies on a volatile mix of wind energy and gas. If wind power production fails during a cold snap, the government must buy gas on the spot market, which is particularly risky given that prices have risen to around 70 euros per megawatt-hour.
This surge in costs will likely first affect industrial companies, and then households when they renew their annual contracts. Energy prices in Germany are already among the highest in the EU, contributing to a decline in retail sales and industrial production. With GDP growth remaining weak, further price increases could paralyze energy-intensive sectors.
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The government’s regulatory authority believes that the risk of a complete supply disruption is low, leaving stock management to the private sector. However, the lack of profitability in storing gas now to sell later has discouraged companies from filling their tanks.
Germany is also facing fierce competition from Asian buyers for American LNG. On the political front, Chancellor Merz is in a precarious position, and may be forced to implement price caps or costly subsidies to appease public opinion, which would put a strain on an already scrutinized budget.
Germany’s decision to abandon coal and nuclear power has made it more reliant on imported gas, which has increased its vulnerability to price volatility.
Une vague de froid intense pourrait inverser les progrès récents et replonger l’économie dans la récession.
La dynamique économique allemande, qui s’était récemment améliorée, est gravement menacée par une crise énergétique imminente.
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