Gas prices are falling but the problems are “still far from behind us” – FRANCE 24

Published on: 25/10/2022 – 17:02 After falling below 100 euros per megawatt hour (MWh) at the start of the week, the price of European gas continued to fall on Tuesday, returning to the level posted last June. However, its price remains twice as high as at the start of the year and is heavily penalizing the industry of the Old Continent. Explanations. The price of gas is back below the symbolic bar of 100 euros per megawatt hour (MWh), ie three times cheaper than at the peak observed last summer. A continuous decline for several weeks which was confirmed on Tuesday October 25 since the Dutch TTF futures contract, a market for shippers and buyers which serves as a benchmark for natural gas prices in Europe, was trading at 93.50 euros. we are emerging from a period where prices were at levels we would never have imagined, levels mainly linked to the Ukrainian conflict and the violent post-Covid economic rebound of 2021″, explains Raphaël Trotignon, in charge of the Energy-Climate division. for the Rexecode firm. “Gas prices, like those of oil, are based on a balance between supply and demand. However, today demand is weak, in particular because of the exceptionally mild temperatures in October, while that the supply is abundant with full tanks, which also creates logistical problems”, explains consultant Nicolas Meilhan, engineer and energy specialist. From the fear of running out to the overflow of gas After a see fears of a shortage linked to the energy war waged by Vladimir Putin, the Europeans today have so much gas that they no longer know what to do with it. As of October 19, the EU had filled its stocks to almost 93%. The LNG (liquefied gas) tanks, the demand for which exploded with the approach of winter to replace Russian gas, are saturated. . Last week, more than 35 ships were on standby around the Mediterranean and off Spain, yet the best-endowed country in Europe with six LNG terminals. A “completely exceptional situation”, traders and operators explained to Reuters. European individuals have used their heating little since the beginning of autumn due to very high temperatures for the season. In France, the month of October 2022 could even become the hottest on record. The fall in gas consumption is particularly striking in Germany since it has fallen by 21% over the last three months compared to the same period of 2019. Industrial activity at half mast On the other hand, it is useless to hope for a drop in its energy bill next month. European households benefit from price shields and already pay much less for gas than its real price. As for the companies, they sign long-term agreements. Only the groups which are currently renegotiating their contracts could therefore possibly take advantage of this situation. Although the reduction in the price of gas may appear to be good news for the EU27, its price is still twice as high as at the start of the year. year and forced companies to produce less in the context of a slowing global economy.>> To read also: a recession in Europe in 2023? The grim forecasts of the OECD “High gas prices and government sobriety instructions have led manufacturers to consume less. Some have even been forced to stop production, in particular industries that use a lot of gas”, recalls Nicolas Meilhan. “50% of total aluminum production capacity has been lost in Europe and 70% of fertilizer production has been stopped or slowed down,” says the expert. In France, Duralex, the famous glass manufacturer, has recently announced the shutdown of its production furnace at the Chapelle-Saint-Mesmin plant (Loiret) from November 1 for a period of four months. “This shock to energy prices is quite targeted on the “Europe and unfortunately it is a monstrous lack of competitiveness compared to the United States” where gas prices are five times lower, notes Raphaël Trotignon. A warm winter, and after? This situation gives in any case l water to the mill of Germany which opposes the capping of gas prices desired by France. Indeed, why cap prices at the risk of creating a movement of concern among suppliers when prices are falling? The question should be at the heart of the meeting scheduled for Wednesday in Paris between French President Emmanuel Macron and the German Chancellor, Olaf Scholz.>> Also read: Energy, combat aircraft, anti-missile shield: the Franco-German couple in turmoilLast Friday, European leaders endorsed a roadmap to reduce energy costs, but find mechanisms that suit all the Member States is going to be difficult. Norway and the United States.Even if gas prices have tended to fall in recent weeks, they remain very volatile on the markets and while the conflict in Ukraine is i nstalled in the long term, supplies are not guaranteed in the medium term. “The gas problem is still far from behind us”, warns Raphaël Trotignon. “This year, we were able to fill our reservoirs largely thanks to Russian gas before the major interruptions in deliveries. Russia ?”