As of: February 1, 2024, 9:54 a.m
By: Matthias Schneider
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A mild winter and strong wind power generation have significantly reduced electricity and gas prices.
But the increasingly tense situation on the Red Sea is now pushing up oil prices.
Munich – Thanks to strong wind and water generation, the majority of German electricity is green in January and the prices for electricity and gas are pleasingly low.
Consumers can get their supplies much cheaper than in 2023. At the same time, the Middle East conflict is escalating a little further.
Wind power reduces electricity and gas prices
It has not been true for years that Germany only runs in winter thanks to coal-fired power plants.
The record-high wind power generation this winter even ensures a green electricity share of 58 percent this January, as can be seen from the Fraunhofer Energy Charts.
This and the increased hydropower generation have significantly reduced the burden on expensive gas-fired power generation, reports analyst Edoardo Campanella from Unicredit.
The costs for CO2 certificates have fallen by a good quarter since December alone, a sign of weak coal-fired power generation.
On the electricity market, a megawatt hour costs around 76 euros, and a similar level is expected for 2025.
This means the situation is better than the forecast; at the beginning of December, over a hundred euros were paid for 2024.
The Suez Canal and the Red Sea are considered sources of conflict by the Houthi rebels, and the US Navy is fighting missiles.
But fighting in the Persian Gulf would be far more dangerous for energy supplies.
© Patrick Pleul/dpa
The prices for natural gas have also fallen significantly: between January and December 2024, a megawatt hour costs between 29 and 35 euros, and in 2023 the expectations for this year were usually around 50 euros.
Edoardo Campanella sees a good chance that this price level will last until autumn: high gas storage levels, continued low demand and a diversified supply of liquid gas are pushing prices down.
However, the analyst also sees risks: last winter was mild, gas consumption from the industrial and heating sectors is still 20 percent below the 2021 level and ten percent of European gas still comes from Russia.
Bottom line: The conditions are extremely favorable, but it doesn't have to stay that way.
Price jumps of over 100 euros are possible.
Gas and electricity cheaper for consumers than in 2023
Favorable conditions are depressing both short-term and long-term prices for electricity and gas.
Consumers have been able to benefit from the cheapest tariffs for years; the national average is 7.2 cents per kilowatt hour for gas and 26.8 cents for electricity, both gross and including the basic fee.
The values can vary significantly regionally.
This means you can save several hundred euros on gas compared to the beginning of January alone, even with the cheapest tariffs.
In view of the still high global market risks - including in the Persian Gulf - a contract with fixed prices is recommended.
Attack from US base endangers oil supply
In contrast to natural gas, oil prices are feeling the effects of the fighting in the Red Sea.
While a barrel of crude oil cost 76 dollars at the beginning of January, today it is 82. According to Carsten Fritsch from Commerzbank, this is primarily a risk premium: only at the weekend were there attacks on a Russian tanker in the Red Sea and a US base in Jordan .
The Houthi rebels, who are supported by Iran, in particular, have been bombarding the important sea route with missiles for weeks, which is sometimes forcing tankers from the Middle East to take detours.
An escalation of the conflict with the rebels or even Iran is considered the most dangerous development.
Edoardo Campanella currently sees three risk scenarios: tougher US sanctions against Iranian oil, attacks on Saudi Arabian oil wells from Yemen and conflicts on the Strait of Hormuz, the oil and gas bottleneck in the Persian Gulf.
In the last two cases, Unicredit expects oil prices to exceed $100 per barrel. Without further escalation, it expects prices to be between $80 and $85 in the medium term.
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