The ukrainian war has skyrocketed the price of natural gas and it is not foreseeable that this raw material will return to the levels prior to this crisis, when it was around 20 and 30 euros per megawatt-hour (MWh), according to the estimates compiled by the Government in the update of the Plan of Stability 2022-2025. In fact, it will be at the end of that period when gas reaches its lowest level: 50 euros per megawatt-hour, the same price that the Executive will set as the maximum limit for electricity production.
The price of gas closed 2021 at €46.7 MWh, marked by “geopolitical tensions and doubts regarding Nord Stream 2” that led to very high volatility in gas in December, and will end 2022 at 93.9 euros MWh, according to the projections of the Executive. The year began with a price stabilized at 80 euros MWh, but it shot up with the start of the war until it reached its historical maximum (on March 8 with 345 euros MWh). “Since then, the market overreaction has been moderating and the price of gas has gone stabilizing slightly above 100 euros MWh & rdquor ;, says the text.
The next year it is estimated that it will still finish very high, with an average value four times higher to what would be usual, €81.9 MWh. So, to avoid contagion of this cost in the electricity bill During the winter, the limit of 50 euros MWh, agreed by Spain and Portugal with the European Commission, will still be in force. And precisely that will be the price at which this raw material is installed this four-year period.
In 2024 it is expected to mark 66 euros MWh to ‘lower’ in 2025 to 50 euros MWh. And it is that, despite the fact that it is foreseeable that the current volatility “will moderate & rdquor ;, according to the text, “gas prices most likely will not converge until the previous reference to the conflict (20-30 euros MWh) & rdquor ;. That is to say, they will remain installed in the environment of 50 euros Mwh for quite some time.
In its estimates, the Executive compares the intensity of the energy price crisis of the last few months with the one produced in the seventies of the last century and explains that this crisis has a component “temporary& rdquor ;, which depends on the duration of the conflict, and another “more structural”, marked by the impact on the energy markets of a reduction in the russian gas dependency by the European Union, which will mark the future of energy prices.
Russian supply disruption
With this scenario, it cannot be ruled out, says the Stability Plan update, the possibility of a climbing that leads to a gas embargo “or in the unilateral decision by one of the parties to cut off the flow & rdquor ;, something that already happened on April 27 with the supply to Poland and Bulgaria. This cut caused a reduction of the total flow of gas to the European Union that took him “again in the pre-conflict levels” (Paradoxically, with the beginning of the war, at the end of February, the arrival of Russian gas to the EU through the gas pipeline increased by 20%).
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Today, Europe imports 150,000 million cubic meters of natural gas Russia, 43.1% of its total natural gas consumption. This rate is low when compared to the 83.5% it represented just four years ago, in 2018.
In this regard, it is noted that a european disconnect of Russian gas would cause, in the short term, a reduction in overall supply“since this gas cannot be redirected immediately to Asia given the lack of sufficient distribution infrastructure and that would cause a increased competition for the supply of liquefied natural gas (LNG) & rdquor ;. That is, a more likely tighter supply and higher prices.