Thursday, March 28

The price of gas begins to collapse: Europe has done its homework in time for a harsh autumn


Europe is breathing lightly these days. After several months of constant rise, the price of gas is finally giving relief and has fallen by more than 30% this week. It is still above €200/MWh, but it is already far from the peak of €350/MWh that it reached last week. A dangerous level that threatened the viability of the European energy system. Fortunately, it seems that the European Union’s moves to reduce its dependency are beginning to have an effect.


Gas reserves have been filled at a good pace. Europe has done its homework. Despite the fact that Russia has reduced its gas shipments, which has affected the rise in prices, the different countries have increased their gas reserves in anticipation of winter. And they have done it before the appointed time.

The vast majority of countries in the Union have already reached the 80% target, which is an advance of two months compared to the date set, according to Bloomberg. These good numbers are one of the reasons that have been taken into account by analysts when explaining the recent drop in the price of gas.

Europe prepares for a winter without gas from Russia.  It can go very wrong if there is no solidarity

Europe consumes much less (but it is August). Even with the heat and the return of consumption during this holiday period, gas was reduced by 12% during the month of August compared to last year, according to Citigroup. In other words, European countries have implemented gas saving measures in a significant way. This reduced demand for gas, together with the increase in reserves, is helping to reduce the perception of risk.

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It should be noted that the month of August is traditionally the month of lowest consumption, since the factories close. We will have to wait until September to see to what extent the reduction in gas is real, once the industry returns to normal activity.

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The level was almost unsustainable. After climbing to €350/MWh, gas is falling rapidly.

Still far from the 15% or 20% that Germany wants. The agreement of the countries of the European Union is to reduce gas consumption by 15%. A fact that has not yet been reached, but where it is on the right track. Even so, countries like Spain will only have to do it in a lower percentage, 7%, although the government has promised to reach 8%.

Germany, one of Europe’s major gas dependents, wanted gas consumption to be reduced by 20%. A high percentage for which they have had to opt for other forms of energy, from coal to nuclear.

Let no one sing victory. Despite the drop in price, gas is still at extreme levels. To get an idea, its price is 4 times more than last year. And let us remember that already then there was talk of historical maximums.

The price of gas usually increases also in winter, with the arrival of the cold and the need to use more heating. If this winter has low temperatures, Europe can be in a tough situation. Even with the reserves at a good pace as they seem to be, Europe does not rule out that some restrictions will have to be made.

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These restrictions are not contemplated for Spain, as Pedro Sánchez recently explained, because according to the Spanish government, “we have a safer situation than other countries.”

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