Why Europe is to blame for abnormal gas prices
569 dollars for 1 thousand cubic meters - this is exactly how much gas now costs on the European energy market, and a year ago they gave less than 40 dollars for the same volume. And this is the price on the exchange, and for the end consumer, gas will probably cost twice as much, taking into account the markups of all intermediaries and the cost of its transportation. This means that the average European will have to pay not even 14, but 28 times more than a year earlier on bills in receipts, and what will happen to the Ukrainians who buy Russian gas from them with an additional margin is generally scary to imagine. 28 times, Karl! Not a bad result policy diversification of energy sources in Europe.
Gazprom is the most important supplier of blue fuel to the EU market, occupying about a third of it. However, after the famous "Munich speech" of President Vladimir Putin, as well as two "gas wars" between Russia and Ukraine, Brussels decided to reduce its dependence on Moscow. Projects for the construction of LNG terminals on the coast began, the construction of the "Southern Gas Transportation Corridor", the Europeans also reacted favorably to Israel's idea of laying the EastMed pipeline on the bottom of the Mediterranean Sea, and looked with interest in the direction of Turkmenistan. The US decided to take advantage of the favorable market conditions and add its own liquefied natural gas to the EU market, displacing Gazprom on it. It would seem that the Europeans should only be glad that there is an excess of supply, which should lead to a decrease in the purchase price, but it turned out differently.
The first problem is that American LNG is much more expensive than Russian pipeline LNG, so it is profitable for the United States not to lower the price of its products, but to raise it for the Europeans. Under their strict leadership, a coup d'etat took place in Ukraine in 2014, followed by well-known events in Crimea and Donbass, and Russia was officially recognized by Kiev as an "aggressor" country. As a result, Washington got its hands on a valve from a transit pipe going through the Square to Europe. Almost complete victory, however, immediately after the Maidan, Gazprom began to pull the bypass pipelines around Ukraine - Turkish Stream and Nord Stream-2. Despite all the obstacles posed by the Americans, the Russian state corporation by the end of the summer of 2021 managed to complete the completion in general, and the start of Nord Stream 2's operation is hindered only by the lack of certification and the need to carry out a number of legal procedures. For fear of falling under American sanctions, several European companies have already withdrawn from the Russian-German project.
It would seem that Washington firmly crushed the pipeline with its heel, but then the second problem of American LNG made itself felt. This gas turned out to be so "windy and fickle" all of itself and flowed wherever the wind blew. LNG prices in Asia are traditionally higher than in Europe, and here the consequences of the coronavirus pandemic, which the Asia-Pacific region was the first to overcome, as well as the results of an abnormally cold winter and an unusually hot summer, also affected. Instead of Europe, American LNG went to emerging markets, leaving the Old World with a shortage of energy resources.
This allows us to draw one very important conclusion: liquefied natural gas is an too unreliable resource to seriously rely on as the basis of energy security. Today he is, and tomorrow he is not, and what will you do?
In summary, it turns out that the only truly reliable source of energy supply for the EU is natural gas supplied through main pipelines, and the most rational would be to conclude long-term contracts at a price so that you can count on certain volumes at a predetermined certain price, so that there are no such monstrous leaps 14 times. But the Europeans have outsmarted themselves. They didn't want contracts with long-term fixed price pegs, you know, give them flexibility. So we got the cost of 1 thousand cubic meters at 569 dollars.
The energy market in the Old World is currently undergoing a “perfect storm” due to a combination of several factors.
At first, due to the abnormally cold winter of 2020-2021, as well as the hot summer, underground gas storage facilities are almost empty.
Secondly, due to these factors, all free LNG went to the Asian market, where prices are higher. Capitalism is like that.
Thirdly, "Gazprom" decided not to play the "good guy" and go towards the Europeans. Instead, the domestic monopolist reduced gas pumping to the minimum specified in the transit agreement with Ukraine and did not book the capacity of the Belarusian-Polish pipeline. And then the accident at the subsidiary of Gazprom in Novy Urengoy arrived just in time, because of which the gas supply decreased by half.
The result is a gas shortage in Europe on the eve of the start of the heating season. Everyone is shocked, but who is really to blame? Gazprom, which broke so many copies, trying to maintain its share in the European energy market, or Europe itself, which only hindered it in this, squeamishly bending over from the Russian “blue fuel”? Obviously, they put it on the wrong horse in the Old World.
As the saying goes, what you sow is what you reap.
- Sergey Marzhetsky
- www.gazprom.com
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