Expert: Energy price falls coming, but will take time

The Estonian end of the Balticconnector gas pipeline in Paldiski.
The Estonian end of the Balticconnector gas pipeline in Paldiski. Source: Siim Lõvi/ERR

Energy price falls in the wake of the cooling down of major countries' economies will reach consumers in the end, but only after time, particularly in Estonia and Europe as a whole, energy policy expert Andres Mäe says.

Talking to ERR's Vikerraadio Friday morning, Mäe said: "The major countries' economies are cooling down, and an energy prices correction is not at all unexpected in these circumstances."

"China's major cities are in quarantine again due to the coronavirus, which also means that the price of oil will fall," Mäe went on.

"These lower price will also reach consumers sooner or later, though perhaps not as quickly as we would like. The energy price drop will reach Europe later, the main reason for this being the war in Ukraine,."

With natural gas, the time taken to establish Liquefied Natural Gas (LNG) capabilities means that a price correction in gas prices as a whole may not even happen next winter, let alone the coming one, Mäe said.

A price ceiling in Europe would always favor pipeline gas, he said, which is currently off the table since Russian monopoly Gazprom had been providing the bulk of Europe's needs up until the current crisis.

With oil, Russia has less of a global grasp, Mäe added, and has to compete with other countries, though the recent OPEC production limit is relatively small, and since prices dropped following the cut, a further reduction in supply might be expected here, Mäe said.

While the Kremlin has so far seen success in threatening European via restrictions on the supply of natural gas, if European countries could wean themselves off this source for good, the longer-term prospects of the policy's success were more limited, Mäe went on.

Of more concern is Saudi-Russian cooperation on oil, even as Saudi Arabia has tended in the past more to incline towards the west.

Prince Salman has reportedly pledged to help Russia out in the event of an oil embargo from, for instance Europe.

The US put an oil and gas embargo on Russia early on in the conflict, but since that country obtained only a small proportion of oil, and virtually no gas, from Russia, this was both easier to install and less damaging in its effects.


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Editor: Andrew Whyte

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