Dmitry Lovetsky/AP Save for later Print Download Share LinkedIn Twitter European gas prices have yo-yoed from record gains to steep losses as short-term factors have combined with the secular shift of the energy transition to upend the market’s equilibrium. The extremes reflect changing supply-demand fundamentals in the gas market as Europe struggles to compete against Asia for unallocated LNG volumes. Western European leaders have resisted laying the blame for high prices on the continent’s rapid shift to renewables, saying instead it is symptomatic of continued fossil fuel dependence. But Russia has been quick to try to capitalize on the crisis to strengthen the position of its vast gas reserves through the transition. The heated rhetoric over Europe’s energy scarcity this winter is yet another example of the shifting relationship between energy producers and consumers as both try to navigate the energy transition. Near-term gas prices as measured at Europe’s benchmark Dutch TTF gas hub traded at the equivalent of almost $60 per million Btu in late 2021. They have since fallen by more than half but remain some six times higher than this time last year. The high prices and lower Asian demand helped attract spot LNG cargoes to Europe, which boosted LNG imports to 7 million tons in December.Russia has asserted it has met its contractual obligations with its European customers but has failed to make additional volumes available to meet increased demand. State giant Gazprom is hoping it can convince its most important customers in Europe to continue buying under long-term contracts. Moscow argues that such deals will result in cheaper and more stable prices for European buyers and lock in a place for natural gas for the next 20 to 30 years through the energy transition. Such arrangements could solidify the outlook for state revenues as China continues to drag its feet on contracts for new volumes and maintain gas as a viable geopolitical tool in Russia’s relationship with the West. Russian officials point to Europe’s accelerating energy transition and reliance on spot LNG and gas deliveries as the culprit for the continents rising energy costs. Russia has found limited success in its strategy so far as it has yet to sign up customers to significantly higher volumes or extended contract terms. It has renegotiated existing arrangements in Greece and Italy to amend pricing terms, but it did not increase the length of the deals. A 15-year agreement with Hungary for 4.5 billion cubic meters annually primarily shifts the transit path of the gas without adding more supply. Any hope that tighter gas supplies might speed Germany’s approval of the controversial Nord Stream 2 gas line seem to be dwindling as Berlin takes stock of an escalating conflict between Russia and Ukraine before awarding it a certificate to operate.While the current price volatility in European gas and power would seem to have accelerated Brussels’ policy push for the transition — or at least galvanized efforts to expand renewable power — it could be seen buying more time for gas and potentially nuclear as well. The proposed EU taxonomy guidelines for sustainable investments could allow both fuels to qualify for green funds for at least another decade. This comes as a relief to a group of Eastern European countries, including Poland and Czech Republic, which hope to carve out a more stable place for gas to help phase out their dependency on coal. But concessions to keep gas in Europe’s green graces need to be balanced with a strict end date for fossil fuels post-2030. Draft EU proposals want investments in some gas projects to be classified as “green” if they replace coal-fired power, limit emissions and have a plan to switch to “low-carbon” gases by 2035. Germany’s new government has already committed to building more gas power plants but only if they can be transitioned to run on hydrogen. The Netherlands is building new nuclear plants to ensure energy security. The EU also introduced policy measures calling for an end to long-term gas supply contracts that extend beyond 2049.