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The rise in the price of CO2 certificates is not the reason why household prices for natural gas have risen by more than 100%, says the Intelligent Energy Association, which has reviewed the real reasons for the price rises.
According to AEI, the causes of the gas market price rises were mainly due to:
- Gas Release Program (GRP) – which brought in Romania a gas price of at least 5% below the price of gas from Eastern Europe (traded on the Vienna Stock Exchange), starting from June 2020, so some suppliers understood that this program offered them the opportunity to make a considerable profit and bought natural gas from Romania and exported it to countries where the Vienna price applied (Hungary, Austria).
- The export of natural gas under medium and long term contracts and short term import at SPOT – GRP prices has been a measure that has led to increased gas imports. More gas exported was purchased on the basis of annual contracts, i.e. at prices set last year with delivery in 2021, while imports are purchased at SPOT, depending on immediate demand, at higher prices.
- Demand much higher than supply. Even if this situation is generated by the natural decline of gas fields, it also comes against a background of increased demand “forced” by inappropriate “free connection” policies. This summer the quantities put on the market were small, which “simulated” a continuous discrepancy between supply and demand. This situation has been dragging on seemingly inexplicably for 3 months, but not just any months but summer months. It is another cause of the increase in the price of gas traded on the exchange.
- Panic in the market due to lack of information. Given that not all gas is traded on the exchange, it is very important in Romania that the market has information on average traded gas prices. The ANRE, which is obliged to produce a report on average gas trading prices, publishes the reports with a delay of 4-5 months, which has essentially contributed this summer to the creation of a panic on the gas market, which is essential for increasing the price of gas.
- Inadequate public policies to increase demand for gas in the context of a real lack of gas resources and to stimulate imports.
- The change in gas routes from South-East Europe, with the cessation of supplies from Ukraine to Southern Europe, and the consequent changes in supply coverage, has also led to significant changes in the level of gas prices imported into Romania.
The effects of these price increases are commodity price hikes of between 25 and 140%, and energy poverty will rise from 17.5% to around 42%, the association says. Thus, according to an AEI study, Romanians will return to the living standards of 10 years ago.
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AEI points out that the law on vulnerable consumers is an undesirable measure, but it pales in comparison with the disastrous situation we are heading towards.
“At the moment the main problem is at the level of companies, especially those for which energy is an important component in the cost of production. In a few months companies will close their doors and start laying off workers, once they have stockpiles due to the increase in the price of their products, and this will put a heavy strain on the national budget, on the one hand by reducing income and on the other by increasing expenditure. This should leads us to stop talking and to start acting, while there is still time, to save what we can save. The clock is ticking and in a few months’ time some actions will be irreversible,” concludes the Association.