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When gas determines power
17/04/2026
Correlations in times of energy stress
Our Chart of the Week examines how German electricity prices, crude oil, and European natural gas prices (TTF) move together across different market environments since 2015. Rather than focusing on price levels, the analysis compares the co-movement of these markets during periods of energy stress – including the oil price collapse of 2015/16, the European energy crisis of 2022/23, and the conflict in Iran – and during more normal phases. The aim is to highlight how market linkages change across different stress regimes.
The most striking result is the sharp increase in between electricity and gas prices during crisis periods. In calm market conditions, the relationship between the two is relatively weak. Under energy stress, however, it strengthens markedly. This appears to reflect the structure of the European power market, where gas-fired generation often sets the marginal price. As a result, shocks in the gas market can be quickly transmitted into electricity generation costs and, ultimately, electricity prices.
Even during crises, however, this correlation remains well below one. Electricity prices are shaped not only by fuel costs, but also by weather-driven demand, renewable output, power plant availability, grid constraints and regulatory intervention. These factors dampen price synchronization with gas and help explain why electricity prices retain a degree of independence even under stress. At the same time, the energy transition – with a rising share of renewables and the parallel phase-out of conventional capacity – has increased structural volatility. Together with higher system and hedging costs, this has tended to put upward pressure on electricity prices, even as the role of gas is likely to diminish over the longer term.
By contrast, the correlation between electricity and oil prices remains low, even in crisis phases. Brent crude is not a meaningful input for European power generation and affects electricity prices largely indirectly, for example via macroeconomic channels such as expectations or broader commodity . Direct price coupling between the two markets is therefore limited.
The relationship between oil and gas prices strengthens moderately during crises. This points to shared risk factors in periods of stress, such as geopolitical shocks or a broader reassessment of global energy scarcity, without eliminating the distinct regional and fundamental drivers that shape each market.
Overall, the analysis highlights a clear pattern: under normal conditions, electricity prices are largely driven by local and short-term factors. During energy crises, however, gas tends to move to the center of price formation and ties the German power market much more closely to developments in the European gas market. As Martin Moryson, Global Head of Economics, puts it: “The energy crisis has shown that gas remains the decisive price setter in the German electricity market in the short term – even if the long-term direction is clearly towards more renewables.”
Correlations of European energy markets in crisis and non-crisis periods*
Sources: Bloomberg Finance L.P., Ember, DWS Investment GmbH as of 4/13/26
* Weekly returns are computed from calendar‑week average prices (weeks ending Friday) for German electricity, Brent crude oil and European natural gas (TTF). Pairwise correlations are calculated separately for energy crisis periods (2015/16 oil price collapse, 2022/23 European energy crisis and recent geopolitical stress) and non‑crisis periods.
This information is subject to change at any time, based upon economic, market and other considerations and should not be construed as a recommendation. Past performance is not indicative of future returns. Forecasts are based on assumptions, estimates, opinions and hypothetical models that may prove to be incorrect. Alternative investments may be speculative and involve significant risks including illiquidity, heightened potential for loss and lack of transparency. Alternatives are not suitable for all clients.