Page 7 - FSUOGM Week 40 2022

FSUOGM COMMENTARY FSUOGM

Italy and Belgium – have put forward an alter- said he was open to the idea, telling Politico that
native proposal for a “dynamic price corridor” “no solution should be off the table.” However,
that would limit gas market volatility by pre- he also said he was sceptical that the cap would
venting prices from rising or falling beyond a achieve its aims, “because the danger of doing
certain level. Under this proposal, some pur- that is that you may limit supply.”
chases would still be possible above the price European Energy Commissioner Kadri
ceiling. Simon is due to visit Algeria on October 10-11
The European Commission still has “signifi- to hold talks on the cap there as well.
cant work” to do on designing the gas price cap European spot gas prices have fallen substan-
system, Irish Prime Minister Michael Martin tially since spiking at an all-time record in late
said following the October 7 meeting. August. The November contract at the Dutch
“Very significant work needs to be done by TTF hub dropped to €144 per MWh ($1,490
the European Commission ahead of the next per 1,000 cubic metres) during early trading on
Council” meeting on how to limit gas prices, October 10, down nearly 8% from the previous
he said. And a further six months are needed session and over 40% down from the record high
to work out proposals to reform the wholesale of €350 per MWh on August 26.
energy market and delink gas prices from power Despite further reductions in Russian gas
prices, he warned. supply, high prices have triggered reductions
While continuing with internal discussions, in European demand, causing those prices to
the Commission is also reaching out to its sup- fall. The drop on October 10 was supported
pliers to discuss the price cap. Norway’s govern- by increased LNG imports and higher nuclear
ment previously rejected the measure, but in power output in France, which has experienced
late September Prime Minister Jonas Gahr Store significant outages this year. ™

ENERGY CRISIS: Bruegel gas use

tracker shows a tight market but

falling EU consumption

Bruegal takes stock of how Europe will fare this coming winter.

EU THIS winter is going to be tough. An energy are now over 90% full just before the heating
crisis has already led the EU to spend over half season starts and, depending on the weather, it
a trillion euros on relief and support. Only last seems that Europe can squeak though this win-
week Germany announced a new €200bn pack- ter. A key element will be for Europe to reduce
age to deal with the crisis that comes on top of its gas consumption as relatively small reduc-
the €80bn it has already spent. And the IMF tions make a big difference to the volumes of
predicts that a third of the world’s nations have gas needed. European Commission President
already gone, or will go, into recession in the next Ursula von der Leyen championed a plan to
12 months. At a recent summit the EU estimates reduce gas consumption by 15% in July in an
that the bill could rise to €2-4 trillion by the end effort to keep the lights on but while she wanted
of 2023. Record high gas prices is a major con- the reductions to be mandatory and EU-wide in
tributing factor to all these problems, especially the end the plan was massively watered down,
in Europe. with 17 out of the 27 member states receiving
“The energy crisis, especially in Europe, is not exemptions or calve outs.
a transitory shock. The geopolitical realignment Belgium-based think-tank Bruegel has been
of energy supplies in the wake of the war is broad tracking gas consumption and reports that so far
and permanent. Winter 2022 will be challenging, Europe has managed to reduce gas consumption
but winter 2023 will likely be worse,” Pierre-Oliv- by 7%, which will help.
ier Gourinchas, the Director of Research of the “So far in 2022, we estimate that EU natu-
IMF, said in a recent blog. ral gas demand (which does not include stor-
The EU is taking action. The gas storage tanks age filling) has declined 7% compared to the

Week 41 15•October•2022 www. NEWSBASE .com P7