Europe's Gas Storage Crisis Sparks Economic and Political Pressure

Europe's natural gas storage facilities are only 69% full, well below the average of 85% for this time of year over the past five years. This is putting pressure on governments to ease the burden of high energy prices and is particularly acute in Germany, where Chancellor Friedrich Merz faces increasing demands from the far-right Alternative for Germany (AfD) party to lower fuel prices.

The situation has been exacerbated by near-record prices for diesel and other refined petroleum products, with gasoline up 24% and diesel up 38% across the European Union compared to last year. The European Central Bank (ECB) has raised interest rates in an effort to combat inflation, but officials warn that further rate hikes may be necessary if energy prices do not ease.

Economists estimate that vulnerable sectors such as aviation, chemicals, and automotive will be most affected by the gas price shocks, while energy and utility companies are likely to benefit. However, higher interest rates could slow credit growth and limit economic growth. The ECB's Council member Peter Kažimir notes that his focus has shifted from oil and fuel prices to gas and electricity prices.