The gas price continues to fall. We are now back at a level similar to that just before the war in Ukraine started. But you will not immediately notice this in your energy bill, says energy expert Moniek de Jong (UGent).
Gas prices have almost halved since the beginning of December. Where does that decline come from?
“Contrary to all expectations, there have not been many problems with the energy supply this winter. This is partly because it has not been very cold yet, with the exception of that one week in December. As a result, less gas is used. Furthermore, more Russian gas has entered Europe than expected. When the war started, we thought that the Russian gas supply might be over at any moment, but we were finally cut off from the northern supply route in September.”
“In China, there were also strict corona measures for a long time, as a result of which the economy came to a standstill and more LNG might go to Europe. In November there were even tanks with LNG waiting just off the coast of Europe. In addition, we have also succeeded in reducing our gas demand in Europe. In Germany, which was one of the largest consumers of Russian gas, consumption has even fallen by 40 percent when it should only have been 15 percent. Together with the Netherlands, they also quickly commissioned new LNG terminals. The fact that those two countries were able to reduce their gas demand this much has been a huge windfall for the whole of Europe, because it reduced uncertainty in the markets.”
Can we structurally maintain those lower prices?
“We had some luck this winter, but I expect more problems for next winter. With the Nordstream pipelines gone, only the Ukrainian and Turkish routes are left to carry gas to Europe. At the end of this year, our stocks will be fairly empty. And it is not yet certain whether the LNG and gas from other countries can completely replace the Russian supply. The International Energy Agency estimates that Europe will have a natural gas shortage of some 30 billion cubic meters next winter. That’s a huge amount. The only way to do something regarding this is by structurally reducing demand for natural gas. I am thinking of better insulating homes and using heat pumps.”
And what regarding the coming months? Will prices continue to fall?
“We will never go back to the very low prices of the summer of 2021. A gigantic peak like in August last year will no longer occur due to the European price ceiling. But that does not mean that gigantic price increases are completely ruled out. If it gets very cold for a long time, problems will arise. Qatar also threatened at the end of last year to halt gas supplies due to the corruption investigation in the European Parliament. So they can still sabotage pipelines or try to exert political pressure in some other way.”
“If that doesn’t happen, I think prices will continue to fall this winter. Which does not mean that a disaster scenario has not occurred in recent months. People have been pushed into poverty by their energy bills and inflation.”
Will people notice the price reductions on their energy bills?
“People with a permanent contract will not notice it, but that is also the question for people with a variable contract. The gas that is now stored was purchased at very high prices. Energy companies will want to reduce their costs and also want to make a profit, so that the low prices will not immediately translate into a lower energy bill. Energy suppliers also know how fragile the market is. Only when the low prices last for a really long time and all the expensive gas has been sold will people with a variable rate notice this on their bill. My advice is, if you can still afford it, don’t lower your advance amount yet.”