Energy crisis: Why the gas price suddenly falls again

Created: 09/15/2022 05:34

By: Matthew Schneider

Gas prices fell sharply again within a few days.

(symbol photo) © Roman Möbius/Imago

The stock market prices for gas have ended their recent roller coaster ride within a few days with a deep fall of around 45 percent.

Analysts expect further big price falls.

Munich – For many years, a gas price of 20 euros per megawatt hour was considered normal in Europe.

As a result of the post-corona recovery, the level climbed almost tenfold to over 190 euros by December 2021, only to then relax significantly again.

With Putin's invasion of Ukraine, fantastic prices of 200 euros were paid, only to end up at a ludicrous 346 euros as a result of Russia's threatening gestures at the gas tap.

But now - within a few days - the gas price has fallen drastically to the July level of just over 180 euros - what happened here?

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Energy crisis: gas prices fall by 45 percent - how is that possible?

"The market is currently reacting very volatile and very sensitive to current events," explains Philipp Hench, project engineer at the Research Society for Energy Economics.

Because only a few large traders are active on the gas market.

This reinforces the extreme fluctuations.

"The lowering of gas flows through Nord Stream I to zero percent capacity indefinitely has certainly played a role in the recent spikes," Hench said.

The fear of a physical shortage of gas drove prices to unprecedented heights.

But it also works in the other direction: "The federal government was able to fill the storage facilities faster than expected and thus significantly reduce the fear of a gas shortage," says Philipp Hench.

Around the same time, prices began to fall.

"There is a temporal connection here, which we cannot scientifically prove without any doubt in these volatile and sensitive markets," says Hench.

The Economics Ministry expects gas storage to be 40 percent full in February, depending on how severe the winter will be.

Gas crisis: Full storage facilities in Germany relax the market

Figures that also make the analysts at the major bank Goldman Sachs confident: "The TTF prices will continue to fall over the winter," says a recent report by the US bankers.

Prices of 100 euros are expected there in the first quarter of 2023. A small sensation, as the futures contracts had almost doubled for weeks up to April.

For the analysts, the full German storage facilities take the stress out of the market.

Because now it is clear that the Federal Republic no longer has to pay every price in winter, but can wait for more favorable phases.

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Nevertheless, Germany is in an energy crisis.

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Vladimir Putin's options are now also limited: Only nine percent of European gas supplies come from Russia, Germany only gets "homeopathic amounts", as Economics Minister Robert Habeck recently reported.

In short: it can hardly get any worse, which is why gas buyers are calming down a bit.

For consumers, however, the peak has not yet been reached: “The high price level has not yet fully reached consumers.

It is more realistic that the end customers will have to adjust to a significantly higher price level in the medium term after the long-term contracts with their energy suppliers expire,” warns Philipp Hench.

The alarm level could soon be declared in the gas emergency plan - with far-reaching consequences for consumers.