Beixi will stop plugging water again, gas prices will not rise but fall, can you breathe a sigh of relief in the European energy war?

The German-Russian Nord Stream 1 natural gas pipeline, which originally had only 20% of its gas transmission capacity, was cut off again for three days on August 31, and people are not too optimistic about whether the gas pipeline will resume supply as scheduled.

But what is strange is that the Dutch TTF natural gas futures price, which is the reference standard, did not rise but fell on the same day, from 265 euros per MWh the previous day to 239 euros, continuing the rapid decline since the high of 346 euros on August 26.

The sharp drop in natural gas prices largely comes from the market's expectations for the EU to intervene in regulating prices.

on Monday (August 29)

, which is expected to be more clearly laid out at the EU energy ministers meeting on September 9.

The first measure is

, which is expected to be implemented in the form of a price cap. However, it is not clear whether the price cap will be implemented on the energy expenditure of end users, the price of Russian natural gas, or the price of all natural gas imports.

At the national level, Spain, Portugal, France and other countries have taken measures to cap prices or price increases.

The first two reined in prices with state subsidies to natural gas generators, and France more fully nationalized EDF (EDF).

European Union leaders, led by Italian Prime Minister Mario Draghi, have been calling for a price cap on Russian natural gas.

Unlike oil, Russian natural gas is mainly transported by pipelines, and it is difficult to find other alternative buyers for a while, so the EU has the advantage of lowering prices close to the monopoly of buyers.

Recently, there are also media reports that Germany is open to the price limit of natural gas in Europe.

Although the details of this emergency intervention mechanism are not yet clear, the EU has indicated that it will be implemented quickly, showing its determination to suppress gas prices.

However, although the price of natural gas futures has dropped by nearly 100 euros, its price is still nearly ten times higher than that of a year ago; moreover, Russia's natural gas output to Europe today has dropped by nearly 70% compared with the same period last year, and the EU is trying to set prices at the buyer's advantage The actions may make Russia reluctantly cut off its confession.

This Aug. 26, 2022, watch tower in the eastern Finnish town of Virolahti (Pyterlahti) shows the Russian compression station in Portovaya, Russia, according to the Associated Press. Burning natural gas that was supposed to be exported to Europe.

Verolahti is close to the Russian border.

(AP)

The second measure is

.

The electricity wholesale market in the EU operates in a "pay-as-clear" manner. All power generators bid for the lowest price first, but the final price is the price of the last successful bidder. Manufacturers can all sell electricity at the same price.

Due to the extremely low cost of generating electricity from renewable energy, this market mechanism was originally thought to help promote the development of wind and solar power generation.

However, the price of natural gas power generation has often become the decisive factor in the EU electricity price. In addition to the higher cost of natural gas power generation, natural gas power plants can often increase the supply to make up for the lack of electricity supply.

In this disguised form, the price of electricity in the EU is directly linked to the price of natural gas, making natural gas a killer for Russia to directly attack European people's livelihood expenses.

Among these two measures, the one that has a more direct impact on natural gas prices is probably the first one.

In addition to these new moves, there are some positive signs of the EU's energy situation, which has reduced some of the pessimism.

First, according to the EU's official figures, its original target of reaching 80% of its gas storage capacity by November has been achieved two months ahead of schedule.

Germany's gas storage is as high as 84%, and France's is more than 90%.

German Economy Minister Robert Habeck pointed out a few days ago that Germany is making progress on the gas storage target, and its gas prices are expected to fall in the short term.

Second, since July, EU countries have reached the goal of reducing natural gas consumption by 15%, and implemented various energy-saving policies. For example, in France, businesses with air-conditioning are prohibited from opening their doors for a long time. swimming pool etc.

Germany itself has proposed a 20% reduction in demand.

According to July figures, industrial gas consumption fell by 19% year-on-year in Europe and by 24% in Germany.

Meanwhile, some countries have restarted coal power plants to make up for falling gas consumption; Germany is also reviewing its policy of closing three remaining nuclear power plants this year.

Third, when China's economy is stagnant, some analysts also pointed out that some LNG originally supplied to China has been resold to Europe, increasing the supply of Europe.

Natural gas: The picture shows the Reckrod gas storage near Eiterfeld in central Germany on July 14, 2022.

(AP)

According to estimates, if Russia completely stops the supply of natural gas to Europe from October, and assuming that the target of reducing demand by 15% in various countries can be achieved, after the winter, the EU will still have about 20% of natural gas reserves.

This is probably a relatively optimistic judgment, and it is still unknown whether the goal of reducing demand in various countries can be achieved.

Paradoxically, if the above-mentioned "Feng's two tricks" can really reduce the price of natural gas or electricity, it will actually weaken the incentives of the people and enterprises to reduce demand.

Therefore, even if the price of natural gas futures in Europe shows a slight downward trend and Russia's latest Nord Stream "energy card" has not changed its price direction immediately, all walks of life still hold the vigilance of the "enemy" of the European energy crisis.

Previously, everyone from the Belgian prime minister to Shell's chief executive warned that even if the EU can survive this winter, Europe will still face the same energy problems in the next few years.

Judging from the trend of public opinion, it seems that these judgments have not changed because of the temporary drop in gas prices.

The true feelings about future crises are often the premise why people can do their best to avoid crises.

While there may seem to be some good news about Europe's energy situation these days, one shouldn't rest on its laurels.

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