The fallout from the Iran war is now hitting German gas consumers directly: newly signed contracts have become "1.7 cents per kilowatt-hour more expensive within just a few days," price comparison portal Verivox announced on Tuesday in Heidelberg, an increase of more than one-fifth. Meanwhile, gas storage operators have raised concerns about refilling reserves ahead of next winter, and the German government is considering establishing a strategic emergency reserve.
The sharp price increase is being driven by surging wholesale gas prices across Europe in the wake of the Iran war. According to Verivox, European wholesale prices are currently around 68 percent above pre-war levels.
"Existing customers do not need to fear gas price increases for the time being," said Thorsten Storck, energy expert at the comparison portal. "However, fears of a prolonged closure of the Strait of Hormuz and the currently high wholesale prices are causing new customer prices to rise sharply."
Storck advised consumers to review their current contracts, "and if possible, lock in the still often favourable price level for the coming heating season." New customer prices are "still at last year's level," he noted. "Even if the contract still has some time to run, many providers allow switching up to 12 months in advance."
German gas storage facilities are currently filled to approximately 22 percent. "That is not much, but it is sufficient to secure supply for the remainder of the outgoing winter," Federal Economics Minister Katherina Reiche (CDU) said on Tuesday. The gas storage association Ines stated that this level is enough, even in extremely cold temperatures, "to ensure gas supply until the end of the heating season."
However, storage operators within the association warned that the summer refilling process ahead of next winter would become an "extraordinarily large challenge." Due to rising prices, "the market currently lacks any economic incentives to inject gas into storage facilities," they said.
A significant portion of global liquefied natural gas (LNG) production from the Gulf states is currently absent from world markets. Qatar, one of the world's most important LNG producers, is currently unable to ship its gas due to Iran's blockade of the Strait of Hormuz. "The resulting bidding competition between Asia and Europe is driving prices upward," Ines explained.
Economics Minister Reiche pointed to pre-war advance bookings for gas storage capacity, which she said would initially give the government "a good feeling." She also indicated that the federal government is considering establishing a strategic gas reserve for emergencies. "We are discussing setting up a secured reserve separated from the market," she said, adding that how such a reserve could be structured "is currently being determined through expert reports."
However, Reiche's advisory council had recommended against such a strategic reserve in a brief report on the economic consequences of the Iran war published last week. The reserve could only be meaningfully implemented "if additional storage capacities are created for this purpose," said the economists, including economic advisor Veronika Grimm.
Building new storage infrastructure, they noted, is highly time-consuming: "The construction of additional storage facilities typically takes five to ten years for cavern storage and four to eight years for pore storage." Germany already possesses, with around 24 billion cubic metres of capacity, "one of the largest gas storage infrastructures in Europe," they added.
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