Volatile and Bullish European Energy Markets

Will Europe burn more coal given the volatile and bullish gas prices? 

The Ukrainian invasion stands as a hurdle on our way to decarbonization. The war can potentially pause the global race to reduce global greenhouse emissions. Soaring natural gas prices across European markets on the back of war pushes European Union member states to consider force majeure measures to minimize dependence on Russian supplies. One of the most striking measures that can significantly increase carbon emissions is replacing gas with coal in electricity generation to decrease Europe’s reliance on Russian gas supplies in the short term.

War in Ukraine came at a cost to the globe; the civilians, corporations, manufacturers in different parts of the world are already facing and paying for the consequences of the Russian invasion. We are seeing unprecedented day-to-day volatility and bullishness in the European Energy Complex across all the benchmarks since the escalation of the military operations in Ukraine, given the worries and uncertainties over the potential supply cuts.

For example, the Month ahead TTF- the leading European gas benchmark, closed at 192 euros per MWh as of Monday, whereas the figure was only slightly higher than 80 euros per MWh right before the recent military escalations in Ukraine.

The question is: how dependent is the European Energy Complex on the Russian gas supply? And whether we will be able to heat our houses or switch our lights in Europe?

Russian Gas accounts for around 45% of EU gas imports and 40% of overall gas consumption, according to the latest figures available on the International Energy Agency website for 2021. Surprisingly, Russian supply plays a significant role in heating houses and partially supplying fuel for power generation in the European Union. However, it is worth mentioning that the supply of energy commodities dropped significantly since the start of the pandemic, and despite a very healthy post-covid demand recovery – supply did not catch up fully. In 2021 the flows coming through the pipelines from Russia to Europe were 35-45% less than before the pandemic. Considering that pandemic came at a cost to fuel exporting countries, most of those countries still hold on to their partial supply cuts to have a privilege over the prices. Consequently, the European Energy Market sentiment was already quite bullish throughout 2021, given the supplies remained below the recovering demand.

However, most critics consider that further supply cuts are not expected. Russian authorities have made it clear that they are not willing to introduce further cuts to the European Continent. Now the question is, how reliable are the pledges?

To further analyse and understand the probability of supply cuts given the war in Ukraine, we need to look into historical data and contractual obligations between two trading partners, Russia and the EU.

  • Natural Gas is traded internationally by pipeline or shipped as LNG. Russia’s exports account for 26% of international pipeline trade and 8% of LNG trade.
  • About 77% of these exports go to European countries and account for about 40% of Europe’s total natural gas consumption.

Considering the proportion of exports coming to Europe from Russia, Europe is the main trading partner for Russian Natural Gas. The European Union member states have made it clear that if Russia would jeopardise their contractual obligations in gas supply, the EU will not be interested in a long-term partnership. According to the analysts, given the significance of the trade partnership and the weight of gross national income of Russia coming from a single source, the EU – further supply cuts seem to be off the table.

On the other hand, however, Europe seeks to find an alternative solution and actively negotiate with other partners in stake to decrease the reliance on Russian Gas as effectively and urgently as possible. Intergovernmental organisations such as the International Energy Agency (IEA) actively propose alternatives to decouple European Energy security from Russia. The proposal is currently under the consideration and review of European Member states. Among the solutions, one of the most notable is increased investment flows to deploying solar and wind technologies. However, some extreme suggestions as a temporary solution is to use coal to generate the share of electricity that comes from gas. Next week, the European Commission will provide a more straightforward pathway to decrease dependence on Russian gas supplies. Stay tuned and get more details on the results of current talks in our next edition.


Stay safe!


IEA (2022). How Europe can cut natural gas imports from Russia significantly within a year. Retrieved from:

Investing (2022). Dutch TTF Natural Gas Futures Historical Data. Retrieved from:

Vlado Vivoda (2022). How disrupted Russian gas supplies will hit global and Australian prices. Retrieved from:’s%20natural%20gas%20exports,Europe’s%20total%20natural%20gas%20consumption.