Europe’s energy debate continues to be influenced by assumptions that belong to a different era. Throughout much of the period that followed the end of the Cold War, policymakers, markets and consumers became accustomed to a world in which major disruptions were regarded as temporary episodes. Prices could rise abruptly, but the prevailing belief remained that markets would eventually restore equilibrium, competition would improve efficiency and technological progress would gradually lower costs. That assumption is becoming increasingly difficult to defend.
Despite the expansion of renewable energy, the liberalization of electricity markets, unprecedented investments in energy infrastructure and massive public support for the energy transition, energy remains a major source of concern for households and industries across Europe. Between 2021 and 2022, European benchmark natural gas prices climbed to levels that were more than ten times higher than historical averages, while electricity prices in several countries reached records few policymakers had considered possible only a few years earlier. Even after markets stabilized, Europe did not return to the energy reality it previously knew.
What Europe is experiencing today is not merely another cycle. It is the emergence of a different operating environment, one that can be described as energy anelasticity: a condition in which shocks leave lasting effects on supply chains, infrastructure, investment decisions, security priorities and public finances. Rather than fading away, crises accumulate. Each one modifies the system and raises the baseline from which the next adjustment begins.
Over the last four years, AmphorEnergy has maintained that the energy crisis marked a permanent structural transition rather than a short-term spike. At its core, the problem was never just volatile energy prices. By favoring spreadsheet efficiency over technical resilience and geopolitical exposure, policy choices created a fragile illusion of low-cost power that shattered under physical strain.
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The Persistent Misreading of Backwardation
Few concepts illustrate the persistence of outdated assumptions better than the interpretation of backwardation. Whenever futures prices are lower than current spot prices, observers frequently conclude that energy prices will inevitably decline. The argument appears convincing because it relies on the collective judgment of financial markets. Yet history repeatedly demonstrates that backwardation is not a forecast of reality. It is simply a reflection of current expectations under current assumptions. The distinction is critical.
Financial markets generally operate within horizons measured in months or a few years. States, energy systems and infrastructure investments operate over decades. The gap between these two timelines is often where strategic mistakes originate.
Europe has repeatedly experienced this phenomenon. At the beginning of the century, electricity-market liberalization was expected to lower consumer costs through competition and efficiency. More than twenty years later, affordability remains one of the principal concerns of European energy policy. The promised benefits materialized only partially because the forecasts underestimated factors such as network costs, regulatory burdens, security-of-supply requirements and geopolitical developments.
Similarly, many long-term forecasts failed to anticipate the magnitude of the 2022 energy crisis. Few predicted that Europe would be forced within a remarkably short period to replace over 150 billion cubic meters of annual Russian gas imports through new LNG supply chains, infrastructure investments and commercial arrangements. The adjustment succeeded, but it came at a substantial economic cost.
The same pattern can be observed elsewhere. Expectations that globalization would permanently guarantee access to low-cost energy resources proved overly optimistic. Expectations that geopolitical tensions would gradually diminish proved equally misplaced. More recently, expectations that renewable deployment and storage technologies would rapidly eliminate energy-price volatility have often underestimated the physical realities of electricity systems and the continuing requirement for backup capacity, balancing services and extensive network investments.
The lesson is not that markets are wrong. Markets are highly efficient at incorporating known information. What they struggle to price are the geopolitical disruptions, strategic decisions and structural transformations that have not yet occurred. Backwardation should therefore be treated as a market signal, not as a strategic certainty.
When Geopolitics Becomes a Permanent Cost
The summer of 2026 reinforced a reality that many Europeans had hoped belonged to the past: energy security and national security are once again inseparable.
The war in Ukraine, instability in the Middle East, recurring disruptions in the Red Sea and growing competition for LNG cargoes have demonstrated that geopolitical tensions no longer appear as isolated events. They increasingly constitute part of the operating environment itself. The consequences extend far beyond commodity prices.
Shipping routes are modified. Insurance premiums increase. Strategic reserves expand. Governments invest more heavily in energy infrastructure, cybersecurity and critical-asset protection. Companies redesign supply chains. Financial institutions incorporate higher risk premiums into investment decisions. Costs do not disappear. They migrate. Europe is increasingly paying not only for energy itself but also for the resilience of the systems that deliver it.
The post-Cold War period encouraged policymakers to prioritize efficiency. Today’s environment requires resilience. The difference between the two is substantial. Efficiency seeks optimization under stable conditions. Resilience seeks continuity under unstable conditions. Resilience, however, has a price. That price is becoming an increasingly important component of Europe’s energy reality.
Understanding Energy Anelasticity
For decades, European decision-makers assumed that energy systems naturally returned to a previous equilibrium once a shock subsided. The experience of recent years suggests a different pattern. The conflict in Ukraine did not merely increase gas prices temporarily. It altered trade flows, investment priorities, industrial competitiveness and strategic planning throughout Europe. The attacks on commercial shipping in the Red Sea did not simply affect freight costs for a limited period. They reshaped risk assessments, insurance premiums and transport strategies.
Each disruption leaves behind a residue. Each crisis influences the next decision. Each shock changes behavior. In consequence, European energy systems increasingly display characteristics of anelasticity. They adapt to crises, but they rarely return to the exact conditions that preceded them.
Five major systemic shocks in little more than fifteen years, from the financial crisis and sovereign debt turmoil to the pandemic, the Ukraine war, supply-chain fragmentation and escalating geopolitical tensions, have profoundly altered the context within which energy policy operates.
The question is no longer whether Europe has enough energy. The question is whether Europe can simultaneously preserve affordability, strengthen security and maintain industrial competitiveness in a world where uncertainty itself has become permanent.
The Missing Conversation with Consumers
Perhaps the most neglected aspect of the energy transition is not technological, financial or geopolitical. It is educational. Although Europe is investing hundreds of billions of euros in energy transformation, comparatively little attention is devoted to helping citizens understand how modern energy systems actually function.
Consumers hear that renewable capacity is growing and naturally expect electricity costs to fall. They hear that oil prices are declining and expect immediate reductions at fuel stations. They hear announcements concerning LNG terminals, pipelines, interconnectors and network expansions and often assume that these investments are primarily intended to lower prices.
Reality is considerably more complex
Electricity prices reflect not only fuel costs but also transmission networks, reserve capacity, balancing mechanisms, taxes, regulatory charges and security-of-supply expenditures. Storage technologies improve reliability but do not create new energy. Infrastructure projects frequently improve resilience more than affordability. Security itself carries a cost that ultimately becomes embedded in energy bills. Unfortunately, energy literacy has not become a policy priority proportional to its importance.
This educational deficit creates increasing risks for democratic societies. Across much of the Western world, households continue to face pressures from housing costs, food prices, transportation expenses and energy bills. Citizens are repeatedly exposed to simplified narratives while confronting increasingly complex realities. The result is a widening gap between expectation and experience.
Consumers are told that prices will decline, yet living costs remain elevated. They are told that markets will solve shortages, while governments simultaneously intervene more deeply in energy systems. They are told that infrastructure investments will lower costs, while many of those investments are primarily intended to enhance resilience and security.
When expectations repeatedly collide with reality, frustration inevitably follows. A sustainable energy policy therefore requires more than technical expertise and infrastructure spending. It requires a more honest conversation with citizens about the trade-offs between affordability, sustainability and security.
Beyond the Illusion of Cheap Energy
The central challenge confronting Europe is not simply how to reduce next year’s energy bill. It is how to design energy systems capable of functioning effectively over the next twenty to thirty years in a world characterized by recurring geopolitical shocks, intensifying strategic competition and rising security requirements.
The repeated failures of long-term forecasts should encourage humility. The repeated misinterpretation of backwardation should encourage caution. The persistence of geopolitical risks should encourage realism. And the growing burden carried by households should encourage far greater investment in public energy literacy.
The real question is not whether prices will decline by 10, 20 or even 30 percent during a market cycle. The more fundamental question is whether Europe will return to the low-cost energy environment that shaped political assumptions during the first decades following the Cold War. Increasingly, the evidence suggests that it will not.
Europe is entering an era in which resilience matters as much as efficiency, security matters as much as cost, and strategic autonomy matters as much as market optimization. Understanding that transition may ultimately prove more valuable than any prediction contained in a futures curve. That is the essence of energy anelasticity, and perhaps the defining energy lesson of our time.
