The European Union is heading into winter with gas storage at its lowest seasonal level in more than a decade, while geopolitical tensions and rising energy costs are mounting pressure on households and businesses.

A report released on October 9 by the US-based Institute for Energy Economics and Financial Analysis (IEEFA) said EU gas storage was at 72.4% capacity on October 3, the lowest level for that time of year since records began in 2011. Lower stocks leave the bloc with less of a buffer if demand rises sharply during a cold spell or if liquefied natural gas (LNG) supplies are disrupted.

Citing the EU's full ban on imports of Russian LNG from January 2027, the report stated the bloc may need to reduce gas demand by about 14 billion cubic meters this winter, or 7% compared with last winter, amid higher prices, limited supply flexibility and the risk of colder weather. The institute said the shortfall could also be covered by additional imports, estimated to cost around 3 billion euros, which is about 12% higher for the same volume than a year earlier because of the impact of the Middle East conflicts. 

The European Network of Transmission System Operators for Gas said in its winter outlook that Europe was entering the season with historically low storage levels and volatile global gas prices. Under a scenario of tight LNG supply, storage could fall well below 30% by the end of winter. Gas Infrastructure Europe said the level could reach about 13% under one such scenario. 

The IEEFA cautioned that the outlook does not mean EU storage will run dry. But as storage levels decline, gas withdrawal, due to low pressure, slows, making it harder to meet demand during a late-winter cold snap. Low stocks at the end of winter would also require a larger refill the following summer, potentially adding further pressure to prices.

The strain is already visible in fuel prices. Data from the European Commission's Weekly Oil Bulletin showed that on September 14 the EU weighted average price reached 2.063 euros per liter for petrol and 2.159 euros for diesel, the highest levels recorded in the series. 

Higher energy costs are feeding into broader inflation. Eurostat said the EU's annual inflation rate was 3.2% in August, up from 2.4% a year earlier. Compared with July, inflation rose in 20 of the bloc's 27 member states. Energy prices recorded the largest annual increase among the main categories. 

Several EU countries have introduced emergency measures, including fuel tax cuts and targeted subsidies, while governments have also sought to bolster reserves. But the impact of higher energy costs is extending beyond traditionally energy-intensive sectors, affecting company earnings, investment decisions and competitiveness.

A survey by the German Chamber of Commerce and Industry (DIHK) found that electricity costs had risen for 49% of companies over the previous 12 months, while heating costs—including gas and district heating—had increased for 67%. The survey covered about 3,100 businesses across sectors and regions.  

The survey also pointed to growing pressure on investment. About one-third of companies said high energy costs had led them to delay investment in core business processes. More than 40% said energy prices were hurting their competitiveness, while around one-fifth were considering moving investment or production capacity abroad, had begun doing so or had already completed the move.

DIHK President Peter Adrian has warned that persistently high energy costs are contributing to declining competitiveness, delayed investment and the relocation of production capacity, reported Xinhua. 

The coming winter will therefore test the EU's ability to balance supply security with affordability. How severe the pressure becomes will depend in part on weather, LNG availability and the pace at which storage can be replenished.