If the circumstances weren’t so gloomy, it would be a real roar: Just in time for the turn of the year, the export department of the Russian gas giant Gazprom published the new issue of its customer magazine this week. A funny Santa Claus made of balloons with the words “He-He-Helium!” is emblazoned on the cover, and the name of the magazine also seems particularly black humor after this year: “Gas as usual” – Gas as usual. You have to bring it first – as a company that has been tightening gas volumes for the European market since 2021 and that stopped its gas deliveries under the pretext of defective compressors. Not to mention the Russian attack on Ukraine.
Nothing is as usual in this market, which has never been shaken up like it was by the Kremlin and Gazprom in 2022. February 24, the day of the raid, sent gas prices skyrocketing, as did August 26, when it became apparent that Gazprom would stop supplies through the Baltic altogether. And now? Gas prices at the Dutch trading point TTF have been falling for three weeks, from around 150 euros per megawatt hour to recently below 90. In some hours, electricity is available on the exchange at a ridiculous single-digit price. The peak prices from the end of August, when a megawatt hour of electricity at times cost more than 800 euros, are currently a long way off.
The gas storage tanks are filling up thanks to the mild weather
For once, a couple of fortunate circumstances are linked: Between the years, the energy requirement is generally low, which depresses the price. This year, however, the weather is extremely mild. Because large parts of Europe need less heating, the storage tanks are filling up instead of being emptied. The German gas storage reported more than 89 percent filling level on Friday. For comparison: a year ago, they were already half empty – also because Gazprom had hardly filled its storage facilities in Germany. And as if all that wasn’t enough, a steady wind is currently driving the wind turbines on land and at sea – they have been supplying more than half of Germany’s electricity for days. This, combined with weak demand, is causing prices to tumble.
Only: When will consumers also feel something of the falling prices? The interpretations are different. “One swallow doesn’t make a summer,” warns the municipal utility association VKU. Although the development of gas prices on the spot market in particular is pleasing, it is only a momentary observation. Municipal utilities stocked up on gas over the long term, not on the short-term spot market. “Even if we would like it to be different, the reality will therefore be that energy prices for consumers will remain at a higher level for the time being,” says the VKU. “Only when favorable prices are also established on the futures market will this subsequently lower energy prices.”
Energy prices are falling on the exchanges, but consumers still have to pay more
Consumer advocates are far more optimistic. Although many municipal utilities had increased the prices for electricity and gas again at the turn of the year, says Udo Sieverding, energy expert at the North Rhine-Westphalia consumer advice center. “But I assume that we have reached the top with that.” It is still unclear whether there will already be a wave of price reductions in 2023. However, further increases could hardly be justified. “Unfortunately, experience teaches that suppliers find it much more difficult to lower prices than to raise them,” says Sieverding. New customers would be most likely to feel the easing on the markets. For everyone else, regular price comparisons are worthwhile. “The price range between different municipal utilities is remarkably large,” says the consumer advocate. The only question is how big the willingness to switch is in many households as long as the price brakes for electricity and gas level the prices, at least for the first 80 percent of previous consumption.
But risks remain. A cold spell in January could wipe out all relaxation – only the last mid-December showed how quickly stores that have been filled with great effort can be emptied again. January is also feared for its “cold dark doldrums”: short, gloomy days when neither solar systems nor wind turbines feed in much electricity, although the demand for it is high. And then in times like these there is still the danger that acts of sabotage will throw all plans overboard – such as the explosions on the two Nord Stream lines through the Baltic Sea at the end of September.
Incidentally, in Gazprom’s “He-He-Helium” booklet, these explosions are only called “incidents,” just as the whole war and Russia’s role in it doesn’t appear in one line. Instead, Gazprom analyst Sergej Komlev is allowed to explain how, to a certain extent, the markets themselves led the way in Europe’s energy crisis, without any help from what was once the largest supplier. Instead, a wave of US liquefied natural gas projects have “destabilized” global markets for the liquefied LNG gas. The “unprecedented tightness of the market”, analyzes Komlev, “is likely to continue for at least another two to three years.” What role Gazprom will play after these two or three years, however, remains to be seen.