Russia’s invasion of Ukraine has caused turmoil in the global energy products market, Guntis Lūsis, the company’s energy wholesale director, says in a market review of Latvenergo AS.
He points out that the political will of the West and the imposition of sanctions on the aggressor are grandiose – the goal is to end the war by isolating Russia, and the peace-friendly economy is shocking. This is reflected in the widening of price increases across the widest spectrum, and uncertainty about future developments is leading to growing volatility in markets and the global economy.
Lynx notes that the sanctions have the effect of reducing supply and disrupting supplies, leading to greater demand for alternative supplies. The reaction is reflected in the rapid change in commodity prices. One of the world’s main energy products, oil, is experiencing a record rise in prices.
In the first week of March, oil prices rose by about 20% to $ 120 a barrel. Given that decisions have already been taken to suspend imports of oil and oil products and interstate negotiations on restrictions on the purchase of oil and oil products from Russia are continuing, a further price reaction could reach the mark of USD 150 per barrel, Lūsis predicts.
Like the oil market, the price of coal has risen by more than 50% during this period, reaching and exceeding the mark of USD 200 per tonne. In addition, the price of coal will be particularly high in the coming months due to the replenishment of coal reserves and supply disruptions from South Africa, Russia and Australia, as well as the reluctance of many companies to purchase coal of Russian origin.
The price of natural gas in the market has risen particularly fast, and in the first week of March, the price of gas has been recorded episodically at 200 to 345 euros per megawatt hour. It is noticeable that the expected price on the stock exchange for the next winter has risen by more than 50%. Also, many companies in Europe are already cutting off further natural gas supplies from Russia, which is rapidly increasing the demand for liquefied natural gas (LNG) in the global market. At the same time, discussions are under way at EU level on how to speed up the filling of Europe’s natural gas storage to 80% or 90% before next winter, and there are intense discussions on alternative natural gas supplies from the United States, Qatar, Algeria and Norway.
“With such high prices for natural gas and coal, the consumption forecasts of industrial companies are declining, and this is also affecting the demand for carbon emission quotas. Due to high energy prices, high volatility and economic slowdown are expected. raising bank lending rates, “notes Lūsis.
He says that the impact of the economy on the economy is not considered to be the most important factor, so that the European green course can be expected to suffer short-term losses, but in the long run the benefits will be a rapid abandonment of fossil fuels. Greater attention is already being paid to the construction of new wind farms and solar plants, as well as to energy efficiency, such as building insulation, which will encourage the abandonment of fossil fuels and increase the desire to develop renewables and increase technological development.
“We will work much harder to become energy-independent and carbon-neutral, as the geopolitical drama forces countries to look for diversified sources of gas supplies in the short term and to accelerate the development of a long-term green roadmap for the economy,” says Latvenergo’s wholesale energy director.
Lūsis notes that when thinking about the energy security of the Baltics, there are discussions about the sufficiency of gas resources in the region. He emphasizes that the operative decisions for procurement in the amount of two terawatt hours ensure the production of electricity and heat in Latvenergo’s thermal power plants for the planned basic regime in 2022, at the same time envisaging gas reserves in the event of a possible energy crisis.
Latvenergo is engaged in the production and sale of electricity and heat, as well as in the sale of natural gas and the provision of electricity distribution services. Latvenergo is owned by the state, but the company’s bonds are listed on the Nasdaq Riga debt securities list.
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