It’s like a free fall. One of Europe’s top gas prices has been uninterrupted for some time descending – just as the continent gears up for a dramatic winter, where citizens and businesses may find themselves unable to pay their energy bills.

    Three weeks ago, that price was still at the historic record of 350 euros per megawatt hour. It is now only 200 euros. A discount of almost 50 percent; it would make you lick your lips. According to Goldman Sachs, an American investment bank, the end is also not yet in sight: In the coming months, another 50 percent could go off.

    Good news for households and businesses? I wish it was true.

    For starters, a price of 100 euros, if it does materialize, is still five times higher than the average over the past ten years, during normal times.

    In addition, wholesale prices usually only show up in the end-user bill with some delay, because suppliers enter into long-term contracts with customers and can therefore only pass on price increases every so often. The peak of 350 euros is therefore still ahead for consumers.

    Goldman Sachs wrote in a other analysis from a few days ago: „This is a very painful process […]. Ordinary people have not yet felt the full brunt of the situation.”

    Also read: Brussels comes with energy package, but there are still many uncertainties

    Beneath the surface, the nerves in the gas market don’t seem to have calmed down either. The market is now extremely illiquid, because no one trusts each other (which energy supplier might go bankrupt because it cannot pass on the high costs?). Speculatory traders hoping to make quick money from the turmoil could create new price shocks in such volatile environments, history shows.

    Market ‘broken’

    The fact that Goldman Sachs expects the gas price to fall further in its latest report is because Europe is said to have ‘laid the puzzle’ with regard to winter preparations. The storage facilities are relatively well filled, alternative (liquefied) gas is being brought in and many companies and households have already started to make significant savings on their own, because energy became unaffordable.

    At the same time, however, many uncertainties remain. Perhaps the biggest is just how cold winter gets. Another problem is that stocks normally also have to be replenished in winter, in order to get through the winter itself and not come out completely empty. Because otherwise a country will start preparing for the next one winter with a backlog. Now that Russia hardly sends anything this way, and may soon stop altogether, that becomes more difficult.

    The risk of shortages and possible forced rationing therefore remains, although this varies from country to country. Germany, where cheap Russian gas has been a driving force behind the economy for decades, is especially vulnerable. Analysts at Norwegian energy research firm Rystad said on Tuesday that replacing just half of all of Russia’s gas is already “a monumental task,” requiring “enormous investment and time.” According to them, the gas market is ‘broken’.

    Should the energy crisis actually change in character, whereby the question is no longer whether there is enough gas, but whether people can still afford it, the question is how long this new phase will last.

    Is it just a matter of holding on a little longer this winter, or do Europeans have to get used to a time when gas prices will no longer fall?

    The scarcity is likely to remain for a while. Renewable energy sources, which the EU wants to accelerate as a replacement for gas, ‘may provide solace in the future, but will not help to alleviate the tightness in the oil and gas markets in the coming years, thus easing pressure on the economy ”, write the Hague energy research institute CIEP and the Netherlands Environmental Assessment Agency in an invitation to a panel discussion on the energy crisis later this week.

    Because that is another additional danger: this crisis could just cause a severe recession. All over Europe, companies have shut down or scaled down production in recent months because they can no longer pay the energy bill. As a result, economic growth stalls. In Germany this is even happening at such a pace that some fear for the “de-industrialization” of Europe’s largest economy.

    And if such a country falters, more countries will inevitably follow. JPMorgan, Goldman’s competitor, therefore still sees a recession as a ‘baseline scenario’ for the EU.