Europe could be hit by electricity blackouts in the next few months if average temperatures fall, energy experts have warned.
Analysts at investment bank Goldman Sachs said that Europe has enough gas stored up to get through winter, but if temperatures were to drop, leading to an increase in demand, storage could fall below the record lows seen in 2018.
If this happens “electricity blackouts (are) likely,” the bank’s analysts said.
It also warned that even if Russia ramps up its supplies to the region, north west Europe is likely to see gas prices at around double their normal levels.
This is before taking into account any potential conflict in Eastern Europe.
Russia and Nato are both ramping up their military presence in the area.
On Monday a spokesperson for Prime Minister Boris Johnson said that Russia would make a “strategic mistake” if it took any “destabilising action” in Ukraine.
Number 10 warned of “significant consequences” and indicated that the US and UK could place sanctions on Russia.
If sanctions on Russia hit gas supplies it could also hurt European gas markets, as the region gets around 35% of its gas from the country.
Goldman said that “the current tightness in European gas balances would disincentivise the EU from blocking any existing gas flows from Russia”.
But it warned that if sanctions are placed on gas it could lead to gas prices reaching “even higher levels” than the record set in the middle of December.
The Times on Monday reported that officials are worried that Russia might weaponise its gas supplies in the event of a conflict in Ukraine.
They said that while the UK only gets 3% of its gas from Russia, the UK gas price would be pushed up if Russia restricted supply.
Already now gas prices have increased rapidly, something that is set to hit millions of households hard from the beginning of April.
The energy regulator Ofgem is set to announce a new cap on energy bills, which will run from April to October, in the early part of next month.
Some analysts have predicted that this might push up household energy bills for price cap customers by around £700 per year, or around 50%.
Goldman said: “The impact of natural gas prices on the economy is broader than most people realise.
“This is not only because it is the most important commodity for winter heating or because large industrial sectors, such as chemicals, glass metals smelting and cement rely heavily on gas for manufacturing.
“But, importantly, natural gas is often the marginal fuel for power generation, which means it is one of the key drivers of electricity prices, significantly impacting the broader economy.”