Economics: Could Europe’s energy woes return?

The energy price unwind continues to provide an uplift to activity

The continued decline in wholesale natural gas and electricity prices is clearly providing a tailwind to activity across Europe. But how long will that last? Could winter 2023-24 prove more problematic? 

Lots to be encouraged by …

It’s now clear that it wasn’t just good fortune that helped Europe avoid the worst-case scenario at the end of last year. Efficiency improvements, behavioural change, and the roll-out of additional renewables capacity all played a part.

… but Europe remains vulnerable to several unpredictable events

A decline in Russian pipeline flows, bad weather, or a repeat of the disruption to other forms of power generation could yet again put Europe in a difficult position. Production cuts might be required, and price volatility could return.