Winter cold is causing gas prices to explode in Europe

Gas prices broke a new record this Tuesday in Europe. Since December 1, they have increased by more than 90%.

The course of gas in Europe broke a new record on Tuesday on the first day of winter, boosted by seasonal demand and geopolitical tensions between the main supplier, Russia , and its customers. “European natural gas continues its inexorable rise”, noted analysts at Deutsche Bank, due to “temperatures which continue to drop in Europe” and “the lack of reservation by Gazprom (the Russian gas giant, Editor’s note) of additional capacity in January for gas passing through Ukraine “.

The European benchmark price, the very volatile Dutch TTF, gained more than 22% to settle at 90 , 267 euros per megawatt hour (MWh), after a peak at 180, 785 euros shortly after 12 H 00 GMT (16 H in Paris). UK gas for next month delivery saw a comparable rise and closed at 267, 202111230302, 72 pence per therm (a unit of quantity of heat), after having peaked in session at 451, 72 pence. These highs are ten times higher than the prices seen a year ago.

For some analysts, the recent acceleration of the price spike – by more than 90% since December 1 – illustrates both strong European demand as temperatures drop and fears over supply, a third of which comes from Russia.

A pipeline under pressure

The renewed tensions at the border between Russia and Ukraine are regularly put forward by market observers to explain the surge in prices. Russian President Vladimir Poutine on Tuesday promised a “military and technical” response if his Western rivals do not end their policies deemed threatening. For the Kremlin, the United States and NATO are strengthening their presence at the Russian borders by arming Ukraine, supporting it politically, carrying out maneuvers and deploying forces in the Black Sea.

The Westerners on the contrary accuse Moscow of aggressive inclinations, the Russian army having massed tens of thousands of soldiers on the border with Ukraine, a country of which Russia has already annexed part of the territory. The change of tone in Berlin on the controversial Nord Stream 2 gas pipeline is also at the center of investor concerns, which also makes it possible to bypass the Ukraine, the transit route currently used for much of the Russian gas purchased by the European Union (EU). 1200 kilometers long, the pipeline passes under the waters of the Baltic Sea from Russia to northeastern Germany and has always been defended by the old Conservative Chancellor Angela Merkel.

Chain reaction

The new German government of Social Democrat Olaf Scholz is different less conciliatory. Thus the German Minister of the Economy, the ecologist Robert Habeck, warned on Saturday against “severe consequences” for the pipeline in the event of Russian aggression against Ukraine, following in the footsteps of the new head of Diplomacy Annalena Baerbock who had threatened the 00 December “stop” pure and simple of Nord Stream 2 in case of escalation in Ukraine.

The decision to certify the Nord Stream 2 gas pipeline by the German regulator is not expected before mid – 2022. Gas stocks in Europe were also affected by a prolonged winter in 2020 and have not been sufficiently replenished since. Added to this is a reduced contribution of renewable energies, such as wind power, for meteorological reasons.

This surge is having repercussions on the electricity market, particularly in the United Kingdom. United where energy production is much more dependent on gas and renewable energies than France for example, where nuclear dominates in electricity production. Faced with soaring costs, half of British electricity distributors have gone out of business since this summer.