"Madness is going on in the market": the price of gas in Europe has renewed a historical record

On Wednesday, September 15, gas prices in Europe renewed their record.

During trading on the ICE exchange, the cost of fuel rose by almost 20.6% - to € 79.3 per MWh, or almost $ 964 per 1,000 cubic meters.

The value has become the maximum for the entire observation period.

European gas prices have been steadily growing for six months already, and during this time they have increased almost fivefold.

At the same time, in September, the rate of fuel price growth accelerated noticeably.

So, since the beginning of the month, the cost of energy resources has added 57%.

The main reason for the observed dynamics was the acute gas shortage in European countries.

Anna Bodrova, a senior analyst at the Alpari information and analytical center, spoke about this in an interview with RT.

“The rally in gas prices was forming smoothly and is now gaining full momentum.

This is primarily due to the shortage of gas in the storage facilities of Europe.

Now they are about 70% full, and a year ago at the same time the figure was 93%.

Due to the cold winter and the rapid post-recovery in the eurozone, the need for gas fuel was high, and it was not possible to restore capacity in the required volume over the summer period, ”Bodrova explained.

According to her, in the near future the gas deficit in the region may grow even more due to the beginning of the heating season.

Such prospects are already causing concern among market participants, which additionally stimulates price growth.

Moreover, the situation is aggravated by forecasts about the onset of another cold winter, the specialist emphasized.

“Apocalyptic forecasts have already appeared on the market: this winter the gas price may double.

If the situation develops as it is now, the scenario will be realized even faster, ”Bodrova said.

According to Sergey Kaufman, an analyst with Finam FG, to a certain extent, the agiotage rise in gas prices in Europe is associated with a drop in electricity generation by wind turbines as a result of the absence of strong winds.

In addition, the supply of liquefied natural gas (LNG) from the United States temporarily decreased amid natural disasters in the United States.

So, due to hurricanes and storms, American companies had to stop almost half of gas production in the Gulf of Mexico and evacuate some of their personnel.

This was announced on September 14 by the US Bureau of Safety and Environmental Control.

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The EU's regulatory policy also had a negative impact on the situation, experts say.

In particular, we are talking about the declared transition to the use of renewable energy sources (RES) and the abandonment of coal.

“In recent years, Europe has been actively abandoning coal plants, and record prices for hydrocarbon emissions have made coal an even less attractive option.

However, renewable energy sources are highly dependent on weather conditions and are unable to increase electricity production in a short time.

Europe could partially switch to the use of oil, which is now cheaper than gas, but the scale of such a replacement is limited.

Therefore, the EU does not have full-fledged alternatives, which is why price madness is happening on the gas market, "Sergei Kaufman said in an interview with RT.

Exchange dependence

One of the main problems for Europe was the transition to exchange pricing in the gas market. This point of view in an interview with RT was expressed by Vladimir Olenchenko, a senior researcher at the Center for European Studies at the IMEMO RAS. According to him, the European Union gave preference not to long-term contracts for the supply of fuel, but to short-term, or so-called spot contracts, which are concluded at a specific moment.

“Probably, Europe took such a step under the influence of the pro-American lobby in the EU. Previously, the European gas market was generally autonomous. However, it is primarily US traders who benefit from the transition of gas to the commodity category, since many commodity items are traded on US exchanges. The states are now gradually gaining control over pricing in the European market, and this is probably the most alarming moment for the EU, ”Olenchenko said.

It is noteworthy that fluctuations in gas spot prices do not affect the cost of fuel supplied to Europe via the pipeline.

This was announced on Wednesday by the press secretary of the Russian President Dmitry Peskov.

According to him, recipients of pipeline gas in the EU are not subject to such price volatility, since the cost of energy raw materials is calculated using a different formula.

Against this background, the launch of Nord Stream 2 could stabilize the situation with gas prices in the region, the Kremlin spokesman is sure.

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“Undoubtedly, the earliest possible commissioning of Nord Stream 2 will significantly balance the price parameters for natural gas in Europe, including on the spot market, this is obvious,” Peskov emphasized.

However, it will not be possible to obtain permission to launch the Nord Stream 2 gas pipeline in the near future.

This statement was made on Wednesday by Russian Foreign Minister Sergei Lavrov.

“The work has been completed.

Now the process of obtaining the necessary permits from the German regulator is underway.

The process, as it turns out, is not fast under German law: there are four months, the beginning of 2022 is indicated, "RIA Novosti quoted Lavrov as saying.

Shock wave

According to Vladimir Olenchenko, the record rise in gas prices could hit the European industry.

First of all, we are talking about German production.

“For chemical enterprises and corporations in Germany, as a rule, it is gas that acts as a raw material.

The increase in fuel costs makes them less competitive.

Competitors, in particular, the American chemical industry, gain advantages, ”Olenchenko said.

According to him, electricity tariffs are already increasing in most European countries.

As a result, the population will have to spend more on utility bills.

This state of affairs may lead to a decrease in the share of household savings - one of the key sources of investment in the economy, Olenchenko said.

Moreover, the rise in gas prices risks resulting in higher prices for a number of other goods.

Artyom Deev, head of the analytical department of AMarkets, shared this opinion in an interview with RT.

“Record gas prices are becoming one of the main factors behind the growth of inflation in Europe, which, of course, will affect the lives of individual countries and the population. Fuel is needed to generate electricity, and it is used everywhere - in the production of food, cars, and a variety of goods. Energy is the main condition for the existence of an economy. And therefore, the higher the gas prices, the greater the prospects for accelerating inflation, ”concluded Deev.