Page 5 - FSUOGM Week 38 2021

FSUOGM COMMENTARY FSUOGM

Commission invented market-based gas pric- the supply/demand balance in Europe in either
ing, so here is the result,” Putin said. “Those in gas or power, barring an early winter gift from
Europe who agreed to sign long-term contracts the weather gods in the form of unseasonably
with us now can rub their hands and celebrate.” warm weather,” Smith said. “This coming winter,
European energy policy has contributed to if normal or cold, promises to be a painful one on
the current situation in other ways as well. European gas and power markets.”
“It was European governments, especially European consumers will call for action to
Germany, that insisted on massively increas- address the problem, BCS GM expects. But there
ing wind and solar electricity production while is little that authorities can do.
simultaneously forcing nuclear and coal plants “The tools European governments have at
to close well before the end of their useful lives,” their disposal to effectively deal with these prob-
Smith said. “This has driven up the reliance on lems in the short term are very limited,” Smith
gas to fill increasingly large gaps in Europe’s gen- said. “Many of the past policy decisions that
eration stack.” have contributed to the current situation are
Similarly, Europe has “pushed the region’s not reversible in the six months between now
own world-class oil and gas companies to de-em- and the onset of spring weather, no matter what
phasise upstream investment, contributing to measures European politicians and bureaucrats
declining gas production from Europe’s North might attempt.”
Sea,” he said. “Additionally, it was the Dutch gov- Instead, BCS GM expects fingers to be
ernment that took the lead in shutting down the pointed at Russia. EU authorities may give the
super-giant Groningen field in the Netherlands green light to Nord Stream 2 sooner rather than
ahead of time.” later in light of market conditions, even though
Groningen, the biggest gas field in north- a lot of member countries are strongly opposed
west Europe, has been scaling down production to the project. But the pipeline’s launch will not
in recent years to avoid the risk of earthquakes, affect gas markets much beyond sentiment
and it is due to close down completely by 2023. value, the brokerage believes, as Gazprom’s man-
The Dutch government said on September 16 it agement has already said that export volumes
would not consider any changes to policy at Gro- will not change much this year with or without
ningen in light of the price spike. Nord Stream 2 operating.
“It would not be an unprecedented tactic for
What next? European politicians to seek to blame Russia for
Looking forward, BCS GM said that even a what is wrong with the continent’s gas and power
warm winter would be unlikely to solve short- markets. However, this tactic will be heavily
ages, although the current prices are too high undermined if European bureaucrats drag out
to be sustainable, as they will lead to demand the launch approvals of Nord Stream 2,” Smith
destruction. said. “Once the gas is allowed to flow, though, the
“There is no cheap, easy or quick way to alter onus will shift back to Gazprom.” ™

Week 38 22•September•2021 www. NEWSBASE .com P5