Sure, gas prices are falling. You contributed to this yourself: due to energy savings, the demand for gas has decreased. The mild winter also helps: we are coming to an end with solar and wind energy, so we have less need to claim gas reserves.
After the thunderclouds in 2022, the panic in the market is now gone. There is peace, we know more where we stand, it is under control, says Matthias Detremmerie, trader at energy supplier Elindus. “We see that the soup is never eaten as hot as it is served.”
The decrease is primarily felt on the daily market. The fall in price also has an impact on the invoice of the end customer with a variable contract, according to Detremmerie. In principle, anyone who now takes out a variable contract should see the decrease. This does not apply to people with a permanent contract. But they may also be less affected by the price increases in 2022, if a contract was concluded just before the crisis.
The question is whether all suppliers will immediately implement the lower gas price. Energy expert Moniek de Jong (UGent) is slightly less optimistic. Rates that are set now will decrease slightly. But less than the gas price drops, she predicts. This applies to both the gas and electricity bill – the gas price dominates the electricity prices. In other words: the price paid for natural gas is passed on in the price for electricity.
Suppliers are currently still cautious regarding implementing lower prices, says De Jong. A price increase is easier to set than a price decrease, as the latter involves more risk. And suppliers want to see a stable decline in the longer term. The falling gas price offers no definitive guarantees for the future.
Logistic puzzle
Because despite the favorable news, there are still a number of unpredictable scenarios in the air. When the winter is over, gas supplies are replenished. The question then is what the course of events will be: have we run out of stock, or is there still 30, 40 percent available? Everything must be 90 percent completed by November 1. So the logistical puzzle begins in the spring, says De Jong.
Detremmerie thinks that it is not too bad with replenishing the reserves. “Due to the relatively mild weather, gas reserves are not being used at the moment. Due to wind availability, there is a lot of wind energy. If there is less demand for gas, gas-fired power plants can run cheaper. We are in the middle of winter and can already fill reserves.”
Untrustworthy friends
The search for good gas deals for next winter is, as always, closely related to geopolitical factors. Take China. Now that the zero-covid policy has been halted, the economy in the country is picking up once more. The demand for LNG (liquefied natural gas) is therefore expected to increase. LNG is a good alternative to Russian gas for Europe (although we still import reasonable quantities of liquefied gas from Russia), but the places where this can be obtained are limited. LNG comes almost exclusively from Australia, the US and Qatar.
The LNG supply goes to the country that is willing to pay the most, and China is a major competitor for Europe, says Detremmerie. “If the battle breaks out and China starts outbidding, Europe will have to pay more.”
Our LNG friends are also not always reliable. Qatar threatened to close the tap last year. And in the US, a lot will also depend on the elections in 2024. If the Republicans come to power, there is a chance that supplies to Europe will come under pressure, predicts De Jong, because cheap natural gas may then become more important for the Americans is going to be. And Australia, given its location, mainly serves the Asian market. If we want to get liquefied gas there, it will involve high transport costs.
Acute panic over
We’re fine for now. The US is willing to supply and there are new deals with Qatar. But we are still not at the level before the energy crisis and will not return to it anytime soon, both experts predict. The peaks we saw in 2022 are a thing of the past. We won’t be seeing those extremes anytime soon. Although caution is advised. If we still have a cold winter, we will have a different conversation, Detremmerie warns.
Then of course we always have the price ceiling that keeps the price in check, but there are also snags to that, says energy expert De Jong. “If the security of supply is endangered, for example due to competition on the LNG market, this can still be abolished.” She therefore advises not to reduce the advance amount for the energy bill yet.
The price on markets is our best estimate of what the future will bring and we see that the price has fallen, says Detremmerie. Before the winter of 2024, the pressure is somewhat off. “The acute panic that we can’t handle the winter, it’s over.”
