Europe’s gas prices are surging. Who will be the first to pay more?

Europe is bracing for a potentially challenging winter gas season, with wholesale prices nearing their highest level in over three years. This could lead to steep increases in household energy bills, particularly in the Netherlands, while countries like Germany, Austria, and France may see the effects take nearly a year to fully materialize.

The benchmark European wholesale natural gas price reached over €66 per megawatt-hour (MWh) at the end of August, down from above €68 earlier in the month. This surge is primarily driven by concerns over the closure of the Strait of Hormuz, which has disrupted a key route for global liquefied natural gas (LNG) trade. As of August 24, EU gas storage levels were at 62.99% capacity, significantly below the five-year average of 79%.

German and Dutch storage levels were even more concerning, at just 51% and 44.3%, respectively. Despite the EU's gas consumption being around 15%-20% lower than in 2021, current storage levels could leave the region more vulnerable to competing for limited supplies with Asian buyers. If this trend continues, Goldman Sachs analysts predict that December 2026 TTF prices could exceed €100/MWh, a 110% increase from their current base case of €50/MWh.

While the extent of the impact on household bills remains uncertain, it is expected that a prolonged rise in wholesale gas prices will eventually filter down to consumers, with some countries experiencing the effects more quickly than others.