Europe moans under weight of gas crisis after prices double 5 times

Gas futures prices in Europe and Britain saw sharp increases today, Wednesday, to hit new records, as Dutch and UK gas contracts rose more than 25%, after hitting 40 % of gains in the morning.

At the extremes of today’s gains, European gas futures will have gained 60% in two days.

Regardless of the large swings, gas price increases in Europe have exceeded 500% since the start of the year, while US gas gains since the start of the year have reached around 150%.

The higher wholesale prices are in part a result of increased demand, especially from Asia, as economies come out of the coronavirus shutdown. The cold European winter and spring also severely depleted supplies in the summer.

At the same time, declining domestic production, adverse weather conditions in the United States and basic maintenance work have created a tight gas market and made it difficult to restock gas before next winter across the region.

Testing

Several UK energy providers collapsed amid the gas price crisis. And September alone saw 9 companies go out of business, according to reports. In a typical year, between five and eight companies leave the UK market, according to UK Business Secretary Kwasi Quarting.

Octopus Energy CEO Greg Jackson – the company that recently acquired more than half a million customers from its collapsed rival Avro – said many companies had failed to weather the crisis because they “Bought short and sold long.” This means that gas trading companies enter into option contracts as a buyer and at the same time buy long term contracts as a seller.

“I think these companies were hoping that if the prices went down they could attract customers with a good deal, and if they went up they would be able to beat the hatches and see the crisis. This crisis is so big no one can. get through if they don’t cover up, ”Jackson explained.

Jackson suggested that stress tests conducted in the banking sector should be applied in the energy sector to ensure that companies operate responsibly. He told CNBC: “What we have seen here is the need to prevent [نفس] Troubles. “We don’t need big regulatory groups, just a few light stress tests. We don’t want to stop competition when the competition is between companies that act responsibly.

“What we need now is to make sure that the competition is based on well-run businesses and that their costs are low because they are efficient and use technology, not because they are competitive. market, ”Jackson added.