• Bundesbank President Joachim Nagel warns that Germany's low gas storage levels pose upside risks to inflation this winter.
  • Storage sites are only around 59% full, the lowest seasonal level since 2009, well below the EU average of 72%.
  • Nagel cautions that "upward risks dominate" the euro-area inflation outlook, with gas prices particularly vulnerable.

Fragile Inventories

Germany's slow pace of rebuilding natural gas inventories has drawn a sharp warning from Bundesbank President Joachim Nagel, who said on 5 October that euro-area inflation risks remain tilted upward, with gas singled out as a key vulnerability. Storage sites are currently only around 59% full—the lowest seasonal level in records dating to 2009—and well below the EU average of 72%, according to industry data. Nagel cautioned that "upward risks dominate" the inflation outlook, noting that low inventories could force Europe to purchase "substantially higher volumes" during winter, when prices are typically elevated and global competition for LNG is fierce.

The warning comes as the euro-area inflation rate runs at 3.8%, nearly double the ECB's 2% target. The ECB has already raised its deposit-facility rate by 25 basis points at both its June and September meetings, taking it to 2.5%. Nagel favors a flexible, meeting-by-meeting approach rather than pre-committing to further increases. Market pricing currently suggests a 20% probability of a rate hike in October and an 80% probability in December, though Nagel did not validate those expectations.

The Bundesbank's concern extends beyond household heating bills. Higher gas prices can feed into electricity, industrial inputs, transport, and food prices. Nagel also cited lost refining capacity, drought, wildfires, and fertiliser shortages as parallel inflation risks. However, he stressed that there are not yet clear signs of second-round effects—a self-reinforcing cycle in which energy inflation becomes embedded in wages and broader pricing decisions. Longer-term market- and expert-based inflation expectations remain consistent with the Eurosystem's 2% target.

Slow Refill Season

The warning follows a lacklustre refill season. Germany was around 57% full in mid-September, or approximately 141 TWh, and industry estimates suggested the country might reach only about 65% by 1 November if then-current injection rates persisted. Storage operators and analysts argue that weak commercial incentives contributed to slow injections: the usual summer-to-winter price premium was absent after gas prices rose following disruptions around the Strait of Hormuz, making storage less profitable.

Quoted German gas futures had risen from about €46/MWh in the second quarter to above €80/MWh in late September, according to German storage-industry commentary reported by DW. Low storage increases the market's sensitivity to cold weather and supply interruptions. The Bundesbank specifically linked the inflation outlook to Middle East conflict and disruptions to shipping through the Strait of Hormuz.

Energy-intensive German sectors—including chemicals, glass, metals, ceramics, and food processing—are particularly exposed to elevated or volatile gas prices, which can pressure margins and competitiveness. Higher wholesale gas costs can also increase heating and power bills, reducing real disposable income, especially for lower-income households with a larger energy share in their budgets.

Political and Regulatory Response

Germany's government and regulator have sought to calm supply-security fears. The Federal Network Agency says gas supply is stable and currently judges the risk of a gas shortage to be low. The Economy Ministry likewise says it sees no current signs of a shortage. Nevertheless, the political dispute is over preparedness and incentives: Bavaria's premier Markus Söder called for federal intervention in early September, while the opposition Greens accused the Economy Ministry of negligence over the low refill level. Proposed remedies include stronger incentives, storage-filling obligations, or a hybrid system that preserves market flexibility while maintaining an adequate security buffer.

At the European level, the issue is inherently cross-border. Germany depends on a mix of pipeline imports, LNG terminals, storage, and gas flows through neighbouring networks. Low inventories across Europe make the continent more vulnerable to competition for LNG, energy-route disruption, and geopolitical escalation. This situation is a legacy of Europe's post-2022 energy reset. Before Russia's full-scale invasion of Ukraine, Germany relied heavily on Russian pipeline gas. Since then, Germany has diversified through LNG capacity, new import routes, supply contracts, and reverse-flow pipeline capability. Officials say this infrastructure is materially more resilient than it was in 2022.

The present concern is less about a repeat of an abrupt, system-wide cutoff and more about the cost and volatility of replacing needed winter supply in a tighter market. The 2022 energy shock remains the relevant precedent because it showed how rapidly gas shocks can spill into consumer inflation, industrial curtailment, fiscal support programs, and political tension.

Economic Outlook

Germany's economy is nevertheless entering a gradual recovery, according to the Bundesbank. Nagel said foreign orders and industrial sentiment were improving, while infrastructure and defence expenditure could support roughly 1% real growth over the year. An energy-price resurgence would complicate that recovery by weakening household purchasing power and raising business costs.

The Bundesbank's current inflation projection is for euro-area inflation to average 3.0% in 2026, then decline to 2.5% in 2027 and 2.1% in 2028. That projected path depends heavily on energy conditions normalizing. A sustained reopening of Hormuz, restored energy flows, and repaired refining capacity would ease price pressure; renewed escalation could do the opposite.

In short, Germany is not currently forecast to run out of gas, but the unusually low storage level makes the country—and Europe—more exposed to an adverse winter price shock. The immediate policy challenge is to protect supply security and affordability without allowing temporary energy inflation to become a persistent wage-price cycle.

Correction: An earlier version of this article misstated the current fill level of German gas storage. It is approximately 59%, not 57%.