Heating is getting more expensive: gas prices remain soaring

As of: 09/20/2021 12:41 p.m.

Consumers should prepare for a more expensive winter as gas prices have been rising for months. Experts warn that the rise in prices could drive inflation further and stall the economy.

Wholesale prices for natural gas have been climbing for months. This is having an ever increasing impact on consumers, because regional gas suppliers are reacting with price increases. According to the comparison portal Verivox, 32 of them have announced price increases averaging 12.6 percent for September and October. When heating a single-family house, this leads to additional costs of 188 euros per year. Almost half of all German households heat their homes with gas.

Gas was still relatively cheap in spring 2020, but that has changed since last winter. The import prices for natural gas, which are determined by the Federal Office of Economics and Export Control, rose by 42 percent from January to July alone. Given the current state of affairs, consumers should not expect the all-clear for the winter. “We expect a bigger wave of gas prices this autumn,” says Verivox energy expert Thorsten Storck.

The memories are comparatively empty

One reason for the increase is that after the economy started up again, global demand has normalized again, explains Fabian Huneke from the consulting firm Energy Brainpool.

In addition, the gas storage facilities in Europe have not yet been completely refilled after the comparatively cold winter of 2020/21. In Germany, they are currently less than two thirds full, as can be seen on the operator’s data platform. A year ago the level was a good 94 percent. Even in most of the previous years, the storage tanks were significantly better filled before the start of the heating season than they are now.

Experts are controversial about why the memories are empty. Failures and maintenance work on the gas infrastructure in Europe would have meant “that the gas storage facilities could not be filled as much as usual over the summer,” says Eren Çam from the Institute of Energy Economics at the University of Cologne. The Essen-based energy group RWE also refers to the phasing out of natural gas production in the Netherlands.

The current high price could also play a role, as companies shy away from keeping too much expensive gas in stock. “The market assumptions about the further development of prices would have led to less gas being stored in the previous feed-in season,” says a spokesman for the energy company Uniper, which has the largest storage capacity in Germany, which is currently around 88 percent full .

“Situation with potential for blackmail”

Oliver Krischer, Vice-President of the Greens in the Bundestag, offers another explanation. “The situation with the empty Gazprom storage facilities in Germany and Europe was probably brought about deliberately,” he suspects. Through its subsidiary Astora, Gazprom operates the storage facility in Rehden, Lower Saxony, which, with a volume of four billion cubic meters, is one of the largest in Europe. Most recently (September 15) the data platform for Rehden showed a fill level of less than five percent.

Germany is slipping “into a situation with potential for blackmail,” warns Krischer with a view to the approval process for the Baltic Sea pipeline Nord Stream 2. Kremlin spokesman Dmitri Peskow last week rejected assumptions that the energy superpower Russia has anything to do with the current price rally have to do.

The storage industry association warns: “If the gas storage tanks are not sufficiently filled, gas supply interruptions can occur at times of high demand,” says Managing Director Sebastian Bleschke. At the moment, however, there is no risk of a supply gap.

What does this have to do with inflation?

The rising gas and energy prices could also have an undesirable side effect, because in the past few months they have caused inflation to rise in Germany and around the world. If this development continues, inflation will continue to accelerate across Europe, quoted the Financial Times (FT) Daniel Kral, an economist at Oxford Economics.

Gavekal analyst Nick Andrews emphasized in the “Financial Times” that the rising energy prices had an effective effect on households. As a result, consumers would have less money at their disposal. This, in turn, could ultimately slow down the economic recovery, as the most recent recovery was to a large extent also driven by consumer spending.

The situation in the UK is serious

Compared to the situation in Great Britain, however, the price increases in this country are still moderate. Wholesale prices there have risen by 250 percent since the beginning of the year. The British Economy Minister Kwasi Kwarteng therefore held several crisis meetings with representatives of the industry over the weekend.

State Secretary Alok Sharma, responsible for the COP26 climate conference, tried to get into one BBC-Interview on Sunday to appease: There is “at the moment no risk in the supply,” said Sharma. Renewable energies urgently need to be expanded rapidly.

The crisis is also affecting food and beverage manufacturers. The sharp rise in gas prices has led to the closure of two large fertilizer plants that produce carbon dioxide (CO2) as a by-product. Among other things, CO2 is required for vacuum packaging for meat or beer. But the health industry is also affected. Because of the lack of CO2, operations could be canceled, said the NHS health service.

Prime Minister Boris Johnson said the crisis could last for several months, but it was only temporary: “Market forces will level it out very quickly and we will do everything we can to help.”

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