Europe Pays for Its Mistakes as Gas Prices Go Sky-High Again
This week started with rising fuel prices, as it is getting colder in Europe. The ICE Dutch TTF January gas futures’ prices are close to $160 per MWh and are above October all-time highs.
The Weather forecast reports that the temperature will soon drop below zero centigrade in several European cities, and that may cause the power grid to exceed its capacity. But Europe became a victim of higher gas prices by its own fault. The European Union is moving towards green energy, and many details about this transformation have been overlooked, including gas pricing. But officials in Brussels are far from blaming themselves. Instead, the European commission moved to scrap long-term gas supply contracts after 2049. Russia, which is a major gas supplier, constantly called on Europe to extend such contracts to avoid high volatility of gas prices on the spot market.
Even 2049 looks like a distant future now. This winter in Europe may be painful as gas supplies from Russia via the Yamal-Europe gas pipeline are close to zero. Warsaw refused to extend long-term contracts with Russia’s Gazprom, replacing it with spot gas auctions. Germany said it would not certify the newly built Nod Stream 2 pipeline until the second half of 2022, and it is also threatening to block the pipeline operations as part of sanctions against Russia in case Russian troops invade Ukraine. Whether there is a political reason behind this threat or not is not really important since Germany will just end up hurting itself.
According to BBC polls energy bills will continue to rise. A cold winter and gas reserves shortage are two main reasons for this. Germany’s gas reserves are only 59% full and will not be enough to satisfy demand in case of a severe winter. On top of this market speculations may push gas prices above $200 per MWh in the beginning of next year. Some electricity producers in Germany like Neckermann Strom AG went bankrupt due to high production costs. Five more electricity producers in Germany filed for bankruptcy in October.
The Weather forecast reports that the temperature will soon drop below zero centigrade in several European cities, and that may cause the power grid to exceed its capacity. But Europe became a victim of higher gas prices by its own fault. The European Union is moving towards green energy, and many details about this transformation have been overlooked, including gas pricing. But officials in Brussels are far from blaming themselves. Instead, the European commission moved to scrap long-term gas supply contracts after 2049. Russia, which is a major gas supplier, constantly called on Europe to extend such contracts to avoid high volatility of gas prices on the spot market.
Even 2049 looks like a distant future now. This winter in Europe may be painful as gas supplies from Russia via the Yamal-Europe gas pipeline are close to zero. Warsaw refused to extend long-term contracts with Russia’s Gazprom, replacing it with spot gas auctions. Germany said it would not certify the newly built Nod Stream 2 pipeline until the second half of 2022, and it is also threatening to block the pipeline operations as part of sanctions against Russia in case Russian troops invade Ukraine. Whether there is a political reason behind this threat or not is not really important since Germany will just end up hurting itself.
According to BBC polls energy bills will continue to rise. A cold winter and gas reserves shortage are two main reasons for this. Germany’s gas reserves are only 59% full and will not be enough to satisfy demand in case of a severe winter. On top of this market speculations may push gas prices above $200 per MWh in the beginning of next year. Some electricity producers in Germany like Neckermann Strom AG went bankrupt due to high production costs. Five more electricity producers in Germany filed for bankruptcy in October.