(Finance) – There is one war within the war Between Russia and Ukraine, the one on gas which has been going on for months now. During the summer months the biggest unknown was related to what it would have happened this winter. Nell worst case scenario It was even talked about possible rationing, fortunately – even in the wake of a preventive action that seems to have proved effective – things are going better than assumed. Finance asked Matteo Villa of ISPI (Institute for International Political Studies) to draw a balance.
“In fact, things are going much better, in the wake of market reactions and that is, industry has started to consume less in part, even thermoelectric electricity generation has gone much better in the sense that we have used something else – unfortunately also coal – because gas was too expensive and, in part, even domestic consumers and offices began to consume a little less, but not much, however 10% for parity outside temperature was also the same with the servants and offices and what’s more we had a mild climate. For example, for Italy my estimate is that almost 40% of the savings of consume it came from the fact that it wasn’t cold, on the contrary it was much hotter on average than in previous years, so we saved a lot. The policy actions have helped to try to reduce bills but have not helped in reducing consumption, we have been very incapable from the point of view of governments, from the point of view of politics to encourage savings and the cap on the price of gas arrived when it was no longer needed to Nothing. We must remember that it was above all the market forces and not so much the actions of politics or the European Union that made the difference this winter, the balance of this winter is that, for example, Europe is at its maximum stocks ever , we’re on the upper edge of the highs, still about 71% capacity, usually this time of year we’re around 50-55% storage capacity, on the other hand, we are very high and Italy even higher, we are currently 12 billion cubic meters, we have 17 of them inside, normally there should have been 10 and if it hadn’t been for the mild climate there was we would have had 9. We can say that it went really well, at least until now, but that doesn’t mean it’s over!.
In the meantime, the EU’s white smoke has also arrived on the price cap: however, there are those who have spoken of a “lame” agreement or in any case a facade rather than substance. Is that it?
“The agreement on price cap, more smoke than substance in the sense that it arrived in December when prices were now falling and it is a downward agreement, that is, with a price from which the cap – therefore the ceiling – starts, which is very high, i.e. at 180 euros per megawatt hour. Now we are at 55 euro megawatts and we are very far from that figure. Even if it rises to that figure, the problem is that you cannot respond to market forces by imposing a ceiling and that’s it, it is no coincidence that market operators, let’s say the Amsterdam Stock Exchange, the one we all look at, the TTF Title Transfer Facility, have already announced that if the price would never get close to 180 euro megawatt hour and the ceiling would go off, in fact they would move to other markets, for example London, to negotiate higher prices because obviously the price is not a random thing or, as has been said in Italy, the result of speculation but a real market response to shortages. It should always be borne in mind that there may be speculative movements on a daily basis, upward speculation is always followed by downward speculation, therefore the market balances itself on this and it is not true that the price was too high, theThe price in August last year was 350 euros to megawatts now reflected a situation of expected, very high scarcity, which fortunately did not materialize. Imposing a ceiling “at random” is useless, so it arrived late but above all we should reflect and in some way perhaps we should also be happy that the ceiling is so high because in this way it doesn’t upset too much a market that is looking for the its price equilibrium, in short, it is not that a legislator can impose prices at random on the basis of nothing”.
The question now that matters is how will Europe act – and how should it act – in order to be able to face the winter of 2023-2024?
“We are fortunate that we will start well because inventories will be very high compared to what we expected, furthermore Russia does not seem to be able to afford to close everything in the sense that in recent months the relationship between what it “closed” and how much the price rose has reversed namely: in the first months of the crisis, the more Russia turned off the taps, the more the price rose and the price rose so much that the more it compensated for the shutting off of the taps, therefore at a certain point the Russia he made us much more money selling much less gas to Europe. This strategy can no longer work because Russia has already closed at 80%, this means that it cannot close all the more and Europe is finding alternative sources, it is hoarding gas elsewhere, the two things put together mean that Russia no longer has a great power of blackmail and therefore there is no enormous pressure. having said that though winter 2023-24 will in any case be a situation of pressure, stress and we have to prepare for it in a serious way, really starting to raise awareness on consumption, i.e. on the fact that if there is a shortage of gas we must start saving it and not instead impose prices that are useless. I repeat the concept: if you impose prices, then market operators, if that price makes sense instead, go elsewhere to negotiate it and this is perhaps the most important lesson of recent months: we must work on the balance between supply and demand , find new supplies or reduce our demand and not make up our minds that it’s the fault of the market, of speculators otherwise we’re not going anywhere.”