Now, really only the Russian gas breakup could bring inflation in Europe.

Soon everyone will come to Russian gas in the EU, according to the amendment adopted by REPowerEU in January, EU companies have not been contracting short-term supply contracts for Russian LNG since the end of April, nor for pipeline gas supply since mid-June. From January 2027, all LNG imports will be banned, and from November 2027, the same will apply to long-term pipeline contracts. This became possible because Russian pipeline gas and LNG accounted for only 12 percent of the EU's supply to Russia by 2025, whereas in 2021, 43 percent of it was exported before the start of the Ukrainian invasion. It is known that Russia replaced the largest share of the EU's fuel with increased LNG supplies from the USA, so American liquefied gas increased from 6 percent in 2021 to 26 percent in the EU's energy mix by 2025. It seems the EU is adequately prepared to shed its five-decade Russian gas dependence, but there are still questions. For example, with the Iranian war, and the increasingly precarious situation with the Strait of Hormuz closed, is it still possible to implement the REPowerEU program, meaning is the reality of the total EU withdrawal from Russian gas still there? And if so, how much will Russian gas supply be redirected to European consumers? Here we are now The research conducted by the Regional Energy Economics Research Centre (REKK) with the support of the European Climate Foundation (ECF) answers these questions. The summary of the results was published on the REKK website in June, and Peter Kotek, the lead researcher at REKK, presented it in detail at a Thursday seminar. As reported, liquefied gas plays a key role in the withdrawal from Russian gas, as the EU seeks to replace the remaining Russian fuel (in LNG form) still arriving from the USA, primarily through American shipments. About 20 percent of global LNG supplies transit the Strait of Hormuz by ship – this majority remains in Asia, where 27 percent of the supply corresponds to 71 million tons per year. In normal circumstances, 9 million tons of LNG are shipped to Europe annually from the Middle Eastern countries, which accounts for only 7 percent of local supply. Therefore, the loss of shipments from the Near East primarily affects the European market, as the shrinking supply pushes local gas prices up – other factors are also involved, but gas prices rose by some days to 80 euros per megawatt-hour in the Dutch gas exchange in Europe (the price was 78 euros for October deliveries at the time of the article). However, since the facilities of the Persian Gulf countries have now left, two-thirds of global liquefaction capacities are still available for Europe. The Australian hubs do not play a significant role in the EU's supply due to the vast distance, but the American and North African facilities are, or rather, gas is sufficient, the price is the question. The REKK first examined how much the Hormuz situation raises gas prices, then modeled how much this would be exacerbated by the cancellation of short-term Russian gas supply contracts, and then by the loss of long-term contracts from 2028 onwards. The analysis also examined how much the fuel would become more expensive in Europe if the Strait of Hormuz were in order, but the American LNG supply was cut off for three months, and we eliminated Russian sources. Finally, they also examined what would happen if the Hormuz situation and the American crisis occurred simultaneously, and there was no Russian gas. Hormuz and the Russians without The REKK analysis found that the loss of LNG from the Strait of Hormuz raised gas prices by the same amount as before the Iranian war, with no regional differences: an increase of 20 euros per megawatt-hour on prices that were 40 euros. The average increase was 48 percent. According to the modeling, if we remove the short-term Russian gas contracts from the European supply, the increase due to the worsening situation in the Strait of Hormuz will be only 49 percent. In the model for 2028 – assuming the strait remains closed – the price increase is 41 percent if long-term Russian gas contracts still exist, and 42 percent if they no longer exist. Thus: the EU ban on Russian gas imports only causes a 1 percent price increase. In euros, this is 0.1-0.2 euros per megawatt-hour (without short-term Russian gas contracts), and 0.4-0.8 euros in Western Europe and 1.1-1.4 euros in Central-Eastern Europe where the seas are significantly closed (without long-term Russian gas contracts). For Hungary, this translates to an increase of 0.1 or 1.4 euros. The analysis also extended to what level of gas consumption reduction could achieve a significant price decrease. It found that a 35 percent reduction in consumption would lead to a 25 percent reduction in prices. To completely eliminate the effect of the Hormuz situation, a 25 percent reduction in consumption would need to be made – at that point, only the lack of Russian gas would bear the inflationary pressure, which would be only 1 percent by itself. But this is a massive consumption reduction: the 2022-2023 energy crisis (which caused a price peak of 350 euros per megawatt-hour in intra-day trading in August 2022) was met by Europe with a 20 percent reduction in demand, which was achieved in an unhealthy way through massive power plant shutdowns. Without the Russians and America According to the modeling, the price increase for Europe would be similar to a one-year closure of the Strait of Hormuz if the supply from American LNG disappeared for three months, for example because hurricanes would devastate much of the US Gulf Coast, which is home to most of the US hubs. 49 percent this year and 41 percent in 2028. However, the lack of Russian gas would only add a minimal increase to these values in this case: in 2026, without spot contracts, only an additional 1 percent, and in 2028, without long-term supply, only an additional 3 percent price increase. This would be 0.4-0.7 euros per megawatt-hour in Western Europe, 0.8-1.4 euros in Central-Eastern Europe, and 1.4-2 euros in our region. Specifically for Hungary, the model showed an increase of 0.4 euros in the first case and 2 euros in the second. Hormuz, America and the Russians without If the Strait of Hormuz closure is accompanied by the loss of American sources, and we also give up Russian gas, then a much more dramatic scenario arises. In 2026, not yet: this year there would be a price increase of 0.1-0.2 euros without short-term Russian gas contracts, but if in 2028 the US also leaves the Strait of Hormuz, when there is no long-term Russian supply either, then the annual sum would be 9.5-11.4 euros in Western Europe and 10-14.8 euros in Central-Eastern Europe for gas prices. For Hungary, the model does not show this increase in the first case, but it predicts 12.8 euros in the second. Both crises together would cause a 106 percent price increase compared to the pre-Iranian war situation if short-term Russian gas is available, but 61 percent if it is not. In 2028, there would be 61 percent if long-term Russian gas exists – without it, 83 percent. In such a situation, a 35 percent reduction in consumption would lead to a 19 percent drop in gas prices, and a 25 percent reduction in consumption would reduce prices by 8 percent. Plausibility of the future Based on the REKK model, it is clearly visible that the lack of Russian gas would only be very painful if neither supply from the Near East nor the USA arrives. In this case, the lack of Russian gas alone would exacerbate the fuel price increase by an additional 22 percent. In all other scenarios, however, it would only cause a 1-2 percent price increase, meaning the withdrawal from Russian gas would be almost completely painless. One of the final lessons drawn by REKK is that the global LNG market, not Russia, determines European gas prices. The risks of American dependence A problem of the traceability of Russian gas emerged in the conversation following the research. Katja Yafimava, lead researcher at the Oxford Institute for Energy Studies, pointed out that it is easy to regulate Russian gas molecules in a commercial sense, but much more difficult in a physical sense – she pointed out that it is possible to document that the gas brought to the EU is not Russian legally, even though it is in reality. For example, if the fuel arrives via the Turkish pipeline, it can only be Russian because it has no connection to the local, Turkish pipeline system, so it is not possible to import LNG arriving at the Turkish hubs into the Turkish pipeline. Moreover, Turkey is not in the EU, it has no obligation to cooperate with EU laws. Therefore, another serious problem may arise: we replace Russian gas dependence with American LNG dependence. Since the share of American liquefied gas could reach 37 percent of the EU supply after the Russian withdrawal, the American national security strategy also contains the text that The increase of our net energy exports (…) allows us to increase our influence. Even under the erratic presidency of Donald Trump, it seems less likely that the USA will also use energy as a geopolitical weapon, as Vladimir Putin did. This is partly because in the USA, private companies rather than state-owned gas companies trade. Mihnea Catuti, the Managing Director of the Romanian Energy Policy Group, said in this regard that "we are not doing anything fantastic in diversification, supply is now more concentrated than before the crisis, but the EU only examines dependence on the Russians, which does not necessarily necessitate diversification." She pointed out that during the 2022 crisis, the renewables were only a small part of the drastic demand reduction, which is far from idealism. Therefore, electrification must be the basis for demand reduction. Catuti hopes that in the future Romania's Black Sea gas fields and Neptune Deep will be fully operational. This can produce 8 million cubic meters of gas per year, from which the whole region can profit. However, this also poses security risks to the Romanian airspace as Russian drones increasingly enter it regularly. Editors: HVG / Reviczky Zsolt