What happened?
On 6 October, European gas prices saw a record increase. The Spanish Prime Minister Sanchez said: "We are facing an unprecedented crisis that requires extraordinary, innovative, serious measures from the EU in order to control this price hike." Addressing the EU Slovenia Summit, he called for the European Council and the European Commission to help resolve the crisis. 

The EU Energy Commissioner Kadri Simson said: "the bloc should provide targeted support to citizens and small businesses that were hardest hit." She called for a shift in taxation which is facilitated under EU directives. With the economic nature of the crisis, Simson notes no quick fixes could help the situation. 

An energy expert, Theirry Bros said: "You're finding yourself in an area where demand has rebounded and on the other side, supply is more constrained. On 7 October, Russia pledged to increase its gas supplies to Europe. Dmitry Peskov said: "existing gas transit routes allow for bolstering supplies before the new Nord Stream 2 pipeline that is intended to bring Russian gas to Germany begins operating. It all depends on demand, contractual obligations and commercial agreements." Russia's deputy Prime Minister Novak promoted launching Nord Stream 2 to facilitate easier gas transit.

What is the background?
First, an unplanned clean fuel transition. In an attempt to attain carbon neutrality, the large-scale transition from coal to cleaner fuel has already begun impacting Europe negatively. Europe began decreasing its coal dependency by phasing out its renewables sector. The Netherlands, Europe's largest producer of natural gas, phased out its Groningen gas field in 2018. The current working gas storage remains at 75 per cent as compared to 94 per cent last year. Wind power produced menial outputs this year owing to a dry weather spell. The consequent dependency of Europe on natural gas rich counterparts like Norway and Russia worsened the crisis when Russia terminated its gas exports.

Second, consumer behaviour. In a colder winter last year, citizens used more coal to heat their homes, leading to a hike in prices. Moreover, the UK's fuel crisis worsened with lower availability of truck drivers owing to Brexit. In an event of delayed gas supplies, consumers emptied most gas stations in the UK. 

Third, gas "peakers". The pandemic led to a surge in the demand of electricity across Europe. As a system dependent on renewables, European girds experienced surges owing to weather changes. In a normal scenario, companies would fill such surges using gas peakers. However, the pandemic promoted a mismanaged use of these gas peakers by companies to generate more profits. Gas producers like Equinor and Gazprom hold the market tight till 2025, creating increasing price hikes. 

What does this mean?
First, the global hike in gas prices. This not limited to Europe. A primary reason for the supply shortage has been the pandemic along with colder winters this year. Industrialists and suppliers have profited from limiting gas supplies causing a consequent hike in prices. Government intervention seems to be the most favourable solution. France and other few countries began price capping and scheduled a planned increase in electricity tariffs for its consumers. The EU has also begun the process of changing its taxation mechanisms to facilitate a smoother winter.

Second, promotion of Nord Stream 2. Russia has intervened in the EU natural gas crisis. It has assured the EU of a consistent supply of natural gas, but there remains an undercurrent of pressure to start formal preparations for Nord Stream 2. The EU may have to hasten the approval of Nord Stream 2 for continued cooperation. Given the economic nature of the problem, there is no quick fix.