Italy blames Germany for high gas prices; Germany rejects criticism

Governments across Europe are grappling with how to protect consumers from rising energy costs and higher inflation as wars in Iran, Ukraine and Yemen send oil and natural gas prices sharply higher. Prices are now approximately three times their level before the war in Iran began at the end of February, and the benchmark European gas price for delivery in the following month on Wednesday exceeded 100 euros per MWh for the first time since December 2022.

Rising energy commodity prices are putting governments under pressure from consumers and opening up debate about what measures can be taken without disrupting the European market. The Italian government, for example, has been lobbying the European Commission for several months for permission to use public funds to reduce gas and electricity costs for households and businesses.

A premium for security of supply

Speaking at the Montel Italian Energy Day conference in Milan, Alessandro Noce, director general for energy markets and infrastructure at Italy’s Ministry of Energy, said Rome had spent hundreds of millions of euros filling its gas storage sites ahead of winter. In this connection, Noce criticized, according to the Reuters news agency, the fact that some member states take a different approach to securing supplies and are entering winter with significantly lower levels of gas in storage.

 “We are getting hit twice: we spent 300 million euros filling our storage sites, and at the same time we are paying higher gas prices because the Germans are only buying it now. That is something that really annoys me,” Noce added.

At the same conference, an energy analyst said that Germany had delayed building up its reserves while focusing on the privatization of its energy companies Uniper and SEFE, which play a key role in filling storage sites.

“Hearing that a European country decided not to fill its storage sites because it wanted to privatize a company is alarming to me,” Noce said.

Germany rejects the criticism

The German government on Friday rejected accusations from Italy that it had deliberately failed to fill its gas storage sites ahead of winter in order to reduce costs for its gas importers and facilitate their privatization. It called the claims “unfounded.”

“We strongly reject the claim that SEFE’s purchase and storage of natural gas is driving up European gas prices and that Germany neglected to fill its storage sites during the privatization of SEFE and Uniper; this is unfounded,” a spokesperson for Germany’s Ministry for Economic Affairs and Energy said.”

The spokesperson also said that SEFE had been instructed to buy gas whenever possible from outside the European Union. “This minimizes the impact on the European market and gas prices.”

Germany’s regulator said on Thursday that the country’s gas storage sites were 61.7% full. Italian storage sites were nearly 91% full, according to Gas Infrastructure Europe, while the EU average was approximately 75%.

According to the German side, gas storage levels in Europe are sufficient even in the event of an exceptionally cold winter.

“While gas storage sites are important, Germany and the European Union also have alternatives available, such as imports of LNG and pipeline gas, as well as a highly integrated and well-developed gas network.”

However, Italy’s argument is not limited to Germany’s lower storage levels; it also concerns the impact of the timing of purchases on the European market. According to Rome, Germany’s late purchases contributed to higher demand in the run-up to winter, and thus to a further rise in gas prices in Europe. This impact, however, needs to be viewed in a broader context.

The natural gas market, particularly for LNG, is highly globalized, and prices are likely to be affected more significantly by geopolitical factors, especially the war in Iran and competition between European buyers and other global markets for available LNG supplies. The dispute nevertheless raises a broader question: is securing gas reserves solely a national responsibility, or is it a shared European interest whose costs and benefits should be shared among member states?

Noce added that if January is as cold as last year, especially in Poland, Lithuania and northern Germany, problems will arise.

“It depends on the weather. We have to root for global warming and hope that January will be warm,” Noce added.