4 ms·

I am an American and not knowledgeable about how energy pricing works, so I am curious, how do we square this with the rates that Europeans have been paying for

by atty 4y ago

I am an American and not knowledgeable about how energy pricing works, so I am curious, how do we square this with the rates that Europeans have been paying for energy and natural gas lately? Are utilities making off like bandits? Or were they running very low over the last few months and suddenly got a huge influx?

KingOfCoders 4y ago
Well lately the price is <100EUR/MWh, peak this year was >350EUR/MWh
guerrilla 4y ago
Yes, on the one hand there are some sticky prices and higher profit margins (which is talked about) but also increased volatility in general. Beyond that, I wish I understood it better.
colechristensen 4y ago
Very short term and local supply and demand issue where there was way more supply than demand. A market inefficiency issue with Europe finding new sources for natural gas supply and being paranoid about running out. They’re trying to cut off Russian supply and being threatened of being cut off. Russian supply is being replaced with American gas. But this is new, it was warm, there was too much gas in places. It happens. It’s good news really.
Denvercoder9 4y ago
> how do we square this with the rates that Europeans have been paying for energy and natural gas lately? Different markets. The price that went negative was for immediate delivery of gas (spot market), while utilities buy their energy way before it's actually delivered (futures market). The price on the spot market went briefly negative because it's unseasonably warm in Europe right now (so less gas usage for heating), and all the storage is nearly full. The price on the futures market is still high, because once it gets cold demand will pick way up and outpace supply. An interesting sidenote is that storage being full significantly increases volatility in the market: in the usual situation, a storage facility would buy up all the surplus gas on the spot market at a cheap but probably non-negative price, store it, and sell it on the futures market for a higher price. This stabilizes the market, and creates some constraints on market prices. Now that storage is full, they can't do that, and prices can fluctuate much more.
sandos 4y ago
Spot electricity prices have been low in Scandinavia, too, so the markets are, at least weakly, linked.

by atty 4y ago

KingOfCoders 4y ago

Well lately the price is <100EUR/MWh, peak this year was >350EUR/MWh

guerrilla 4y ago

Yes, on the one hand there are some sticky prices and higher profit margins (which is talked about) but also increased volatility in general. Beyond that, I wish I understood it better.

colechristensen 4y ago

Very short term and local supply and demand issue where there was way more supply than demand. A market inefficiency issue with Europe finding new sources for natural gas supply and being paranoid about running out. They’re trying to cut off Russian supply and being threatened of being cut off. Russian supply is being replaced with American gas. But this is new, it was warm, there was too much gas in places. It happens. It’s good news really.

Denvercoder9 4y ago

> how do we square this with the rates that Europeans have been paying for energy and natural gas lately? Different markets. The price that went negative was for immediate delivery of gas (spot market), while utilities buy their energy way before it's actually delivered (futures market). The price on the spot market went briefly negative because it's unseasonably warm in Europe right now (so less gas usage for heating), and all the storage is nearly full. The price on the futures market is still high, because once it gets cold demand will pick way up and outpace supply. An interesting sidenote is that storage being full significantly increases volatility in the market: in the usual situation, a storage facility would buy up all the surplus gas on the spot market at a cheap but probably non-negative price, store it, and sell it on the futures market for a higher price. This stabilizes the market, and creates some constraints on market prices. Now that storage is full, they can't do that, and prices can fluctuate much more.

sandos 4y ago

Spot electricity prices have been low in Scandinavia, too, so the markets are, at least weakly, linked.