Why Germany's gas storage levels are so low

Germany's natural gas storage levels are alarmingly low, sitting at just 50.14% of capacity as of Wednesday, marking the lowest point in several years. This stark decline is largely attributed to the ongoing closure of the Strait of Hormuz, a vital energy chokepoint currently disrupted by the Iran conflict. Compared to the same time last year, gas storage levels are 25% lower, and even more significantly, they are over 45 percentage points less than in 2023 and 2024, when Germany adopted robust contingency plans due to Russia's war in Ukraine.

The diversification of energy sources from Russian imports to LNG from the US and Qatar, as well as pipeline gas from Norway, has not offset the situation. Policymakers' priority during and after Russia's Ukraine war was to boost gas storage levels ahead of winter, coupled with efforts to reduce consumer and business demand. However, higher global gas and LNG prices, exacerbated by disruptive Iran attacks, have deterred operators from filling storage facilities earlier in the year, as there's no financial incentive.

Unlike many European nations which purchase gas or use reserves, Germany relies on private energy traders, who are betting on a price drop if the Iran conflict concludes. However, European LNG markets compete fiercely with Asia, where prices are often higher. The Economy Ministry has urged traders to increase gas storage, but achieving the government's target of an average level of 71% by November 1 seems unlikely.

Recent warnings from FNB Gas, Germany's gas transmission operators association, suggest that low LNG imports, potential cold spells, and infrastructure failures could jeopardize winter gas supply. While Germany's gas supply is deemed secure, consumer groups warn of heightened winter gas prices.