The price of natural gas in Europe hit an all-time high on March 7, briefly touching €345 per megawatt-hour. That’s equivalent, in terms of British thermal units of energy, to oil prices of $600 per barrel. Late in the day, the price had settled back to about €190, still a record.
Before the last 12 months—when the European gas market was rocked first by a compounding series of market trends and mishaps, and now by Russia’s invasion of Ukraine—the price had stayed roughly in the range of €15-25 per MWh for a decade.
“The eye-watering risk premium suggests expectations that gas flows will potentially be disrupted by sanctions on Russian energy exports or damage to pipeline infrastructure,” Kaushal Ramesh, senior analyst at intelligence firm Rystad Energy, said in a note. “At these prices, we are likely approaching the limits of affordability in Western Europe.”
Prices like this are fueling momentum for Europe to reduce its gas consumption as quickly as possible—and to levy new windfall taxes on gas companies to help finance the transition to renewable energy.