Energy expert: gas prices will continue to fluctuate

Energy expert Marko Allikson
Energy expert Marko Allikson Source: Ken Mürk/ERR

Gas prices are volatile, so we will continue to see big ups and downs, energy expert Marko Allikson told Vikerraadio's morning show "Vikerhommik." Gas consumption must be reduced, Allikson said, as subsidies cannot alone cover the price increases in their entirety.

"We've seen ups and downs with the prices. The price of gas, which is also the basis for the price of electricity, was €100 per megawatt-hour at the beginning of the summer, it rose to €300 by the end of the summer and has now fallen back to €200. The (price) ranges, even during the day, are very large and therefore difficult to predict. What we can say, is that we will see gas prices continue to jump. There will certainly be news that gas supplies somewhere are being restricted again and the market will react to this with a price increase," Allikson said.

However, such announcements will be counterbalanced by news that consumption has fallen, and that will drive prices down.

"In September, The TTF index, the main benchmark against which gas is bought, reached a record high. Prices have risen and, at the same time, are being passed on to consumers, which is inevitable. Even if gas continues to flow, it does not guarantee us a particular price. Prices are constantly fluctuating. The week before last, prices went up rapidly, however, last week they dropped by a third. The hope is that next month the price will be more favorable, and that (therefore) sellers will take this into account in their pricing (strategies)."

Allikson says the key to the coming winter is frugal consumption, as subsidies will not fully cover the growing costs.

"This winter will be more expensive than last winter, which was also expensive. For domestic consumers, gas supplies are guaranteed, so there is no immediate concern. Larger-scale replacements of gas with other fuels are required for heat production. Either with shale oil or diesel. Yes, (these options) are more polluting, but in the context of the coming winter, they are necessary to get through this period."

Allikson added that subsidies cannot entirely cover the rises in energy prices, meaning energy consumption also needs to be reduced.

"There are certainly some business sectors that need support. But in some other areas, higher energy costs will need to be reflected in increased product prices. After all, we are not alone, energy prices are going up everywhere. Maybe, with this context in mind, our competitiveness will not decrease, because we are all in this together." said Allikson.

However, Allikson added, that there are some areas where gas certainly cannot be substituted for other fuel sources.

"What has to happen is that, in part, consumption has to decrease. It is not possible to offset the entire increase in energy prices. Because any subsidy will help maintain consumption (at its current levels). But for the market as a whole, if I look at it in the European context, it is necessary for consumption to decrease."

According to Allikson, the European Union is now better prepared for an energy crisis than had been feared in the spring, after the outbreak of Russia's war in Ukraine.

"Gas tanks are fuller than a year ago, with an average of 81.5 percent capacity, and in Germany, which has the highest (levels of) consumption, as much as 85 percent. There are also regions, including the Baltics, where storage capacities are not so high. But even on days when no gas comes from Nord Stream, storage in Europe is full."

According to Allikson, in Estonia, Latvia, Lithuania and Finland, there are currently 12 terawatt-hours of gas in storage, which  is less than normal for this time of year.

"This is why it is important for our region that the LNG (liquified natural gas) vessel arrives on schedule, meaning it will also be ready to launch on time, either in Paldiski or in the port of Inkoo in Finland."

Allikson believes it is important that gas consumption levels in the Baltic region have already decreased, with Finland now using almost half the amount it did last year.

"Gas consumption has also decreased in other countries. Information has been coming in from all over Europe that chemical, fertilizer and steel industries have suspended operations, and direct gas and electricity consumption have both been taken out of the market. Yes, this could lead to shortages of other products. But there has been a significant reduction in gas consumption, and that means that there will be plenty of gas to go around, even if there is not such a high supply," said Allikson.


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Editor: Michael Cole

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