Are LNG suppliers experiencing delivery failures? Such fears sent European gas prices skyrocketing earlier in the week. However, it is a long way from the level in summer 2022.
Supply concerns pushed European natural gas prices higher at the start of the week. In the morning, the trend-setting futures contract TTF for delivery in one month was traded on the Amsterdam Stock Exchange at EUR 40.41 per megawatt hour (MWh). That’s eleven percent more than on Friday. In the meantime, the price had skyrocketed by almost 18 percent – to the highest level in almost two weeks.
Problems with LNG suppliers Australia and Norway
The reason for the jump in prices is the news that workers at a liquefied natural gas (LNG) plant in Australia are preparing to go on strike if no agreement is reached in wage negotiations next Wednesday. The industrial action could start on September 2nd. A possible disruption to deliveries from Australia, which could affect 10 percent of global LNG exports, has already kept European traders in suspense.
Most recently, analyst Carsten Fritsch from Commerzbank pointed out that less natural gas could also come onto the market from Norway in the short term. Further maintenance work in an important gas field was required there at the end of the month. Fluctuations on the European gas market are therefore likely to remain high for the time being, despite well-stocked natural gas storage facilities.
According to the latest data from the European storage association GIE, the filling level in all German storage systems was 92.74 percent on August 19. The gas reserves have been replenished for months and are well above the comparative value of the previous year. The reasons for the higher level include imports of liquid gas.
Dependence on Russia greatly reduced
The price of European natural gas is still well below the level it was just before the Russian war against Ukraine began in February 2022. A record price of up to 345 euros per MWh was paid last summer. At the time, the halt to Russian gas supplies in particular fueled fears of an energy crisis.
As a result, Germany and Europe as a whole had greatly reduced their dependency on Russian gas. In 2021, the country’s share of the European gas supply was still around 40 percent. Today it is considerably less. To replace gas from Russia, the EU has increasingly turned to global suppliers of LNG.
After the end of the price brakes, gas will become more expensive again
In order to relieve consumers of the high costs, the federal government introduced energy price brakes at the beginning of the year. As things stand at present, however, the state instruments will expire at the end of the year. At the end of July, Federal Minister of Economics Robert Habeck (Greens) spoke out in favor of extending the electricity and gas price brakes until Easter 2024.
But that is not the case yet. Should the energy price brakes actually disappear, gas would become significantly more expensive on average. This emerges from calculations by the comparison portal Verivox, which are available to the German Press Agency. According to this, the average gas costs per year with a consumption of 20,000 kilowatt hours would increase by 173 euros from the current 2,201 euros to 2,374 euros – an increase of 7.9 percent. If only basic service tariffs are considered, the increase is even higher.
consumer centers recommend provider change
However, households often have the opportunity to switch to a cheaper provider – with tariffs that are below the price brakes. “The prices for electricity and gas are falling, especially with new contracts,” said the head of the Federal Association of Consumer Centers (vzbv), Ramona Pop, of the Funke media group. However, more than 80 percent of households said in a survey that they had not switched this year and had not planned to do so.
“Among other things, they state that they are satisfied with their provider or that they find the price acceptable,” says Pop. Many are now cautious and, to be on the safe side, are staying with their provider. “During the height of the crisis, there were providers who simply terminated consumers from one day to the next. However, we would still advise looking around to see whether there are cheaper providers. It is important to see whether the new provider is also serious “Said the consumer advocate.
According to Verivox, an extension of the price brakes would primarily provide a subjective feeling of security. The portal pointed out that tariffs for new customers are already as cheap as they were before the energy crisis. According to Verivox, a kilowatt hour of gas for new customers currently costs an average of 9.1 cents. In contrast, the price brake caps the gas price at 12 cents per kilowatt hour.