Gas prices are like a hockey stick, noted in the comment for ABF "Economics today» leading expert of National Energy Security Fund, Lecturer of the Financial University under the Government of the Russian Federation Stanislav Mitrahovich.
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Gas prices have broken through the mark in 760 dollars
Gas prices on the Dutch TTF exchange broke through 13 September 2021 a record milestone in 760 dollars per thousand cubic meters.
Gas traders' hysteria was reinforced by Ukraine's decision to halve its firm proposal for additional gas transit for October. Gazprom refused to buy out over-limit volumes for September and will clearly continue this policy in October.
Bundesnetzagentur took four months to certify Nord Stream 2, therefore, the gas pipeline will be launched in September and October. Much depends on the formation of the new German Government, what will take time.
The situation on the EU gas market continues to deteriorate, the heating season has begun in Moscow today, in a month it will start in Europe, and gas supplies to the European energy market are at a low level due to growing demand in Asia and Gazprom's reluctance to increase the transit of raw materials through Ukraine and Poland with the fully completed first string of Nord Stream 2 and the completed second part of the project.
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Until there is no compromise on Nord Stream 2, gas prices will remain at high levels. The limits are incomprehensible, prices in 760 dollars per thousand cubic meters represent an abnormal level and negate the profitability of LNG purchases.
It should be understood, that TTF and ICE exchanges show the order of prices for spot contracts, where is the LNG circulating. Russian gas comes to the EU under long-term contracts, therefore its prices are lower, but Russian raw materials do not completely cover European demand.
Because of this, gas prices for TTF and ICE may go further, the situation today is uncontrollable.
Ultra-high gas prices cannot be long-term
“These prices are just numbers.. When we are dealing with the most liberalized market, at some point, they turn into numbers on the computer and become an abstraction, and not economic reality ", – concludes Mitrakhovich.
This situation is compared with the "hockey stick" schedule., when a slight rise in prices gives way to a vertical spike.
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“The current situation may drag on, but it is obvious, that the current order of gas prices is unlikely to be established for a long period, this is the effect of a liberalized market, on which other situations happened ", – states Mitrakhovich.
There were precedents, when in the USA gas was situationally expensive - for example, during the Texas frost. The Americans even bought LNG from the Russian Federation at that time., to offset the rise in prices, a similar story happened in the Asian market last winter.
“In Asia, prices reached 1000 dollars. Before us is a short-term phenomenon, when commodity prices accelerate to four digits, but this is a reason for those people to think, who brought the gas market to this ", – summarizes Mitrakhovich.
The authors of the short-term energy transition programs are the culprits of the crisis, to diversify the European gas market with a stake on LNG purchases on the world market. These European politicians must answer for the current situation.
“European households have not yet felt the rise in the cost of electricity and gas, they have the so called Cap Pricing, when prices are limited, but, eg, in Great Britain it can be revised in an extraordinary way ", – concludes Mitrakhovich.
vk.com Stanislav Mitrakhovich
The economy suffers even if household tariffs do not rise: losses are paid by the European budget, taxpayers and business.
“The European Commission may initiate an antimonopoly investigation against the Russian Federation. The European market is about to play the peepers, when the Europeans will scare us with new measures, and we - look at the gas price chart ", – states Mitrakhovich.
Dmitry Sikorski
