/Pogled.info/ The European Commission is scaring Europeans with price increases and gas problems next winter. And this is surprising, because experts do not see objective reasons for such an extreme forecast. On the contrary, Europe has learned to live with minimal gas supplies from Russia. Why is the European Commission exaggerating? She does it for a reason.
The European Commission forecasts an increase in prices and does not rule out a gas deficit in the EU in the winter of 2023-2024. This economic forecast was presented by the European Commissioner for the Economy, Paolo Gentiloni. Among the risk factors, the EC points to domestic demand, which could be higher than forecast if the recent drop in wholesale gas prices affects consumer prices. In addition, consumption may prove more resilient and the recovery in demand in China may increase external demand more than expected.
That is why the EC would like to see the joint gas purchase mechanism, designed to help fill EU storage until next winter, launched before the end of the first quarter.
Earlier, the head of the IEA, Fatih Birol, expressed the same opinion, as among the risk factors, in addition to the return of China to the market as an importer of LNG, he named the lack of Russian gas and the weak increase in the supply of LNG worldwide. The IEA estimates the gas deficit in the EU in 2023 at 27 billion cubic meters.
Russian experts, however, believe that the EC clearly exaggerates and does so deliberately.
“Theoretically, there could be a gas shortage problem. However, the risks of its occurrence are already much smaller than those predicted, for example, by our institute in the summer and autumn of last year. We then assumed that the weather during the autumn-winter season would be average for Europe and the depletion of underground gas storages would occur on average for the last five years. However, Europe’s winter turned out to be super warm – and Europe’s underground gas storage was only 20-30% depleted. This means that by the end of the heating season, 40-60% of the gas will remain in the GHGs, which is two to three times more than in the spring of 2022, when the GHGs were filled to the maximum by 20-25% after the winter, “says the director in energy direction of the Institute of Energy and Finance Alexey Gromov.
Keeping such high gas stocks in the facilities means that Europe will have to make much less effort to fill its gas storage for the next heating season.
Another factor plays in favor of the European Union and reduces the risk of gas shortages in the winter of 2023-2024. This is a serious change in the structure of gas consumption by Europeans. They really needed less gas than before.
“For almost half a year, from September 2022, we supply a minimum volume of pipeline gas to Europe. It was unthinkable that Europe could function with such a small amount of Russian gas. Turns out it can. The warm winter played its part, but the main factor is the change in the structure of gas consumption in Europe. We see that in Europe, gas-intensive industries such as the production of nitrogen fertilizers, chemical products and so on are closed – and, it seems, completely. Some enterprises have been transferred abroad, some are simply closed, and the owners have not yet decided what to do. That is, the European economy as it existed no longer exists. Whether this is good or bad is another matter, but it has become different. Now she needs much less gas than two years ago,” says Gromov.
This year, pipeline deliveries of Russian gas are estimated at 30 billion cubic meters, against 140 billion in 2021. The warm weather, reduced consumption and increased purchases by the WRG allow the European economy to survive such a situation.
According to the expert, Europe could experience gas shortages next winter only if two factors coincide. If a really cold winter comes, which due to climate change is still hard to believe. And if fierce competition with China for liquefied natural gas begins.
“We see a gradual warming up of the Chinese economy, but so far this is not reflected in the growth of LNG purchases. Even if China consumes more LNG than last year, then Europe is not Bangladesh or Pakistan, it is a rich region that can offer a high price to compete for gas,” says the interlocutor.
Why then does the European Commission deliberately exaggerate where, on the contrary, one could breathe more freely? First, to preserve the economic demand model for gas that has developed in Europe. Everyone, including households, was ordered to cut gas consumption by 15%. The Europeans will rush to open factories and spend gas.
The second objective of the EC is to legally push the mechanism for joint gas purchases as quickly as possible. This is an old idea of the European Commission.
“We do not see an extremely difficult scenario for the next heating season in Europe. Therefore, what the European Commissioner said, I consider it a terrible story in order to advance the early approval of the mechanism for joint gas purchases,” said Gromov.
As Gromov explains, the point is that the EC wants to collect requests from European countries for additional quantities of gas and buy this volume of gas on the market on its own behalf. Procurement tools can be different. This could be a purchase of that volume on the exchange or a contract on behalf of the EC with a specific supplier, such as the US or Qatar.
The EC broadcasts to the Europeans the benefits of such a mechanism. “This is done to minimize gas competition between EU countries. When there is a shortage of gas in the market, the supplier can dictate its terms. The European Commission wants to strengthen the buyer’s position through such a collective search,” says the expert.
Second, the larger the volume the buyer wants to buy, the more attractive a price he can negotiate for himself.
Behind these short-term benefits, however, lies the EC’s strategic plan.
“The European Commission is seeking to strengthen its control over European national governments. Therefore, the task of the new gas purchase mechanism is to reduce the geopolitical influence of gas suppliers, such as Russia, on individual European countries. For example, Hungary and Serbia under contracts receive Russian gas at a significant discount from the market price. Europeans believe that because of such a favorable trade agreement, these countries are loyal to Russia. The European Commission wants to exclude bilateral contracts from gas trade,” explains the expert.
According to him, the first step of the EC is to convince the Europeans at the legislative level as quickly as possible to unanimously approve the joint procurement mechanism, taking advantage of the exaggerated fear of rising prices. But the next step of the EC will be to strengthen the power in its hands, when only the EC will be able to buy gas for the European countries and, in principle, bilateral contracts will not be possible.
At the moment, the EC cannot do anything about the existing gas contracts between the two countries, but until they expire, the EC hopes to radically change the rules for buying gas – exclusively through itself. They can only push this through during a crisis, which is now.
Translation: V. Sergeev
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