Natural gas prices in Europe are currently much lower than the highest level reached in March, but if you look deeper, you can understand that it can be a sign of more long-term disruption in the market. is - in the midst of a far greater disruption than was seen in the immediate aftermath of Putin's attack on Ukraine.
While the gas market crisis was short-lived at that time, now there are indications that a major crisis like the highest prices from 2023 to 2024 may emerge in the next winter. For the past few days, the graph of gas prices in Europe appears to be an upward trend.
The last month saw the biggest increase in gas prices in Europe, but it has not received enough attention in European capitals. The gas industry is conscious of this as the burden of prices is falling on it. In March, while a German gas producer was setting gas prices of 80 euros per megawatt hour for 2023, it will now have to pay the highest price of 145 euros. It is not that only companies are paying this price.
According to Cornwall Insights, UK households will spend £3,244 ($3,886) annually on gas and electricity bills from October, an increase of nearly 65 percent. Earlier UK energy consultants had been anticipating only a marginal increase in prices.
Early July saw European spot benchmark Dutch TTF contracts on the virtual trading hub more than double to €175 in a month after Russia cut supplies to Germany from the Nord Stream 1 pipeline. Yet these prices were 30 percent lower than the highest gas price of 227 euros in the early days of the war, so one can say that the situation is worrying but not alarming. After what the market suffered in March, it is understandable why policymakers are very Not worried too much.
Russia has been impacting European gas supplies for more than a year. The market has also understood that the attitude of Moscow is going to remain the same. Its first test is going to be held soon, the annual repair work on the Nord Stream 1 gas pipeline between Russia and the European Union will take place from 11 to 21 July.
Berlin fears that Moscow will find an excuse to keep it closed and that it will completely cut off Germany's gas supply. Germany's concern is justified after seeing Russia's actions. On the other hand, logically though, Moscow is likely to continue supplying some amount of gas as it will not be in a position to exert any pressure if it is cut off completely.
According to Goldman Sachs, a global investment banking, securities, and investment management body, Russia's state-owned gas company Gazprom will lose profits from rising gas prices if the pipeline is not opened after repair. Russia has clearly written off gas relations with Europe. At present, Russia has advantages in two ways - high revenue and stronghold on the position.
To meet its goals, Russia would have to continue selling some gas to Germany but at lower prices. Right now he is doing the same thing. However, the risk remains that Russia may permanently cut gas supplies just before winter to weaken Germany's economy. The market still has no idea if this happens, how much will it cost?
