Gas price cap / gas levy - what's coming?

Good evening everyone,

everyone is talking about the gas price cap and it seems to be coming, it has already been controversially discussed many times. But does it actually help? Or does it only help to keep the gas price stable at the capped maximum gas price and thus also ensure that all gas suppliers simply stick to this upper gas price and the market doesn’t play?

Who is familiar with such important political decisions?

Regards

When demand exceeds supply, prices will continue to rise until demand has decreased correspondingly and supply has increased so that both are in balance. A government cap, price brake, or subsidy does not disable this mechanism. The difference between the capped price and the real price is now paid by the taxpayer, but too much gas is being consumed. Whether we will still have enough gas in storage in winter 23/24 will be a big mystery. Several large consumers have announced that they will restart their production in view of the gas price brake. Additionally, there is the factor that for consumers it hardly makes a difference whether the electricity price is at 45 or 55 cents. Therefore, various windfall effects from providers are to be expected.

Gas that comes with LNG tankers will certainly become more expensive. The intermediate trade in the USA does not make it better either. The newly introduced gas surcharges ultimately only benefit the suppliers. The end customers pay the bill.

Good evening everyone,

everyone is talking about the gas price cap and it seems to be coming, it has often been controversially discussed. But does it actually help? Or does it just help keep the gas price stable at the capped gas maximum price and thus also ensure that all gas suppliers simply stick to this upper gas price and the market does not play?

Who is familiar with such important political decisions?

Regards

It will become very exciting from April or even earlier, because if the storage is not sufficient in winter, even more will have to be purchased. The European gas cap is, I believe, at €130. The current price is €110. Basically, everything is relaxed.

Of course, demand is still normal, but if January turns out to be as severe as 2011, then it may happen that everyone has to buy more.

Russia produces a lot of LNG gas alongside Qatar and the USA. The market is very tense, because in summer we practically drove the prices up with our blank check to fill the storage at all costs.

Now, with the price cap, that is no longer possible, as Russia does not supply countries with a price cap. Qatar remains, but only from 2026 and only 5% of demand. Whether the USA will supply despite the price cap I dare to doubt, for several reasons. I do not want to go into that in detail.

That means Germany will be left without gas to fill the storage for winter 23/24. In 2022 this still went relatively well, until these had to be repaired and afterwards sabotage occurred.

That is exactly why the federal government was against it, but in Brussels you tend to listen more to small countries that cannot afford such an excess as we did in summer.

We can only hope that the winter remains warm, but currently it is not quite clear where the journey is going. The polar vortex is back to full strength. In North America a cold snap is impending and it has become warmer again in Siberia. That means for us no frost for the time being, but no one knows for how long.

We have not had severe winters like those of ’96, 2010 and January 2011 for a long time.

By repair I mean Nordstream. Cannot edit.

The price cap will be suspended under various conditions, including a shortage situation. Furthermore, it only applies to the exchange, but not to OTC (direct transactions). It is purely symbolic politics and will probably have no impact in practice.