The reasons for the drop in gas prices appear to lie on the surface, unusually warm weather even for Europe, which was in the region during the outgoing winter, underground storage facilities of gas (UGS) filled to capacity and an increase in the supply of liquefied natural gas (LNG) from the United States and Qatar. All this is true, but there is absolutely no reason to talk about overcoming the energy crisis, as some Western media do. In the same way, it does not allow to assert that in a cold winter, for example, next year, Europe will freeze without Russian gas, as is sometimes done in our press.When it comes to the energy crisis, wholesale gas prices above $300 per 1,000 cubic meters (remember, gas in the EU now costs just under $540) is very expensive. This is an unbearable burden for businesses and ordinary consumers. For comparison, let’s not even take prices in Russia, let’s take the United States, where gas now costs about $80 per thousand cubic meters, without delivery to the consumer.The second nuance is related to the fact that there has not been a rapid drop in gas prices in Europe. They have been gradually decreasing since the beginning of December, when it became clear that no particular cold weather is expected in the countries of the Old World in the foreseeable future. As of February 16, gas storage facilities were 64.5% full, meaning that now no one really needs it and there is plenty of it.There is also a psychological moment. The European market has adapted to the dwindling of Russian gas supplies, which led to a price shock last year, says Kirill Rodionov, an expert at the Institute for the Development of Complex Fuel and Energy Technologies. energy. Three main factors led to the adaptation of the market: on the one hand, the growth of LNG supplies. The share of LNG in the structure of EU gas imports since the end of 2021 increased from 22% to 39% in the fourth quarter of 2022.Second, the growth of pipeline deliveries from neighboring countries and affected regions. For example, gas imports from the UK, Azerbaijan and North African countries to the EU in the fourth quarter of 2022 exceeded the level of a year ago by 23% (by 38 million cubic meters per day). The fall in demand for gas in the electricity industry, which occurred at the end of last year, also had an effect: production from gas in EU countries in November 2022 fell by 16% in annual terms, according to Ember, the expert specifies.As a result, at the end of the heating season, Europe finds itself with a good quantity of gas in underground storage, but future prospects are still unclear. The fact is that not only the high gas prices, which remain so until now, are bad, but also the volatility of the quotations. Speculators make money from jumps in stock prices, not from companies involved in the actual supply of gas to people and businesses. Gas was pumped into UGS facilities at prices in excess of $1,000 per thousand cubic meters. Selling it now is much cheaper. We can try to keep it in UGS facilities until the next heating season, using regular deliveries for today’s needs. But that will mean a game to increase quotes, and SKU facilities will have to be filled again, but not to the same extent as in 2022.It should not be forgotten that gas deliveries from Russia have gradually decreased over the past year. At the start of the decrease in pumping volumes through the Nord Stream in June, UGS facilities in Europe were already 53% full, and by the time the pipeline closed in September – 81%. Now it has exploded, but the SKU will need to be filled. This means increased demand for gas and naturally rising prices.It is impossible to exclude further price increases from April to October, during the season for pumping gas from storage facilities, Rodionov believes. If Gazprom’s deliveries to the EU do not return to pre-crisis levels, the spring and summer will see new peaks in LNG imports, meaning tougher price competition between Asia and Europe. But the most difficult stage of the gas crisis is still behind us, notes the expert.Fatih Birol, executive director of the International Energy Agency (IEA), disagrees, telling the Munich security conference that the European Union expects a tougher winter l next year 2024. The European Commission has also published a forecast of gas shortages and rising gas prices next winter. In particular, in 2024, Europe faces heightened inflation risks as price pressures will be stronger than expected.In any case, Europe is not in danger of freezing. The EU has enough funds to source LNG from Asia. Therefore, even a very cold winter will not leave the region without gas.All of the above does not negate the sad fact that for Russia the European gas market is almost lost. Almost all the infrastructure that has been under construction for decades, in which huge funds have been invested, has been at best stopped, and at worst, as with the Nord Streams, destroyed. The severing of gas ties between Russia and the EU has made both sides uneasy. And it makes no sense to consider who is worse off.
