Gas prices are falling: Why is that and when will consumers feel it?

Created: 01/04/2023 05:25

By: Fabian Pieper

The gas price goes down.

But it may be a while before consumers benefit from this.

© Bernd von Jutrczenka/dpa

The price of gas has fallen back to the level it was in Ukraine before the start of the war.

But consumers are still not aware of this.

When is it time?

Berlin – People in Germany and throughout Europe feel the consequences of the Russian war of aggression against Ukraine most clearly in their own wallets.

Since the outbreak of war on February 24, 2022, the prices for the energy sources gas and oil have initially risen because Russia has lost its position as an important supplier.

This started a spiral that raised inflation in Germany to well over 10 percent and has made life much more expensive ever since.

In August and September 2022, the price of gas reached its all-time high.

At that time, the wholesale price for one megawatt hour on the Dutch TTF exchange was EUR 346.

The reasons for this were the absence of Russian gas deliveries - also due to the sabotage of the Nord Stream 1 pipeline - and the high demand with a simultaneous low supply due to the corona.

But since then the gas price has been falling continuously.

In the first week of January 2023, it fell below the pre-war level for the first time.

It is currently EUR 71.60 per MWh.

The same applies to the electricity price.

Gas price falls: These are the reasons for the biggest low since the beginning of the war

According to estimates by the Federal Network Agency, the reasons for this lie primarily in the recent mild temperatures - for example, New Year's Eve 2022/23 was unusually warm in many places.

In addition, significantly more energy is said to have been generated from wind power recently, which further depresses the gas price.

The German gas storage facilities are filling up and are well equipped with almost 90 percent full.

This is how the gas price is made up:

• 1. Gas procurement and sales (65.8 percent)

• 2. VAT (16 percent)

• 3. Network charges (10.9 percent)

• 4. Natural gas tax (3.6 percent)

• 5. Carbon price (3.6 percent)

• 6. Concession fee (0.2 percent)

Of course, many consumers are now hoping for falling prices from their gas suppliers.

But many gas suppliers now even want to raise their prices.

The reason: Many suppliers, especially the local basic providers, buy their gas for the long term.

Suppliers with national tariffs, on the other hand, are based on the current wholesale market price.

For this reason, the otherwise rather expensive basic supplier tariffs have meanwhile been significantly cheaper for consumers.

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Gas price brake and tariff adjustments: when consumers will feel the effects of falling gas prices

However, the prices of these tariffs are now rising there, while the wholesale market price is falling at the same time, since basic suppliers cannot react to price changes at such short notice.

In times when gas is expensive, consumers benefit.

However, if the gas is cheap, consumers in the basic supply are usually at a disadvantage - although "cheap" is relative in the current case.

In mid-2021, the price for gas was still around 20 euros per MWh.

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From March 2023, the Federal Government's gas price brake should bring noticeable relief.

That caps 80 percent of consumers' gas consumption at 12 cents per kilowatt hour.

For the remaining 20 percent, however, the usual market prices apply.

According to experts, it is possible that the gas price of the providers will continue to rise until then, since the state has to compensate for this increase for the consumer.

Experts disagree on whether the gas price will fall again in the long term, even if Federal Economics Minister Robert Habeck (Greens) expects prices to fall in 2023.

In order to have the lowest possible gas bill at the end of the year, consumers should always be economical with their gas consumption.