-Growth is gradually recovering, thanks to falling inflation, record low unemployment and increased consumption and investment. But there are structural challenges and geopolitical challenges, said EU Commissioner for Economy, Paolo Gentiloni at the press conference on Friday. It is in its economic outlook, which was presented on Friday, that the European Commission makes its observations about the gas market. Energy prices are one of the uncertain factors the Commission points to, in an outlook that shows that moderate growth is now back in the EU economy. For 2024, the estimate is now a GDP growth of 0.9 per cent for the EU, 0.8 per cent for the euro countries.
The other major uncertainty factor is what happens to trade flows after Donald Trump takes the White House. In addition to the fact that trade relations between the EU and China are sour.
The gas price is important, because it also sets the price of electricity in the EU. Higher gas prices mean higher electricity prices. You can already see that the global unrest is affecting the price of gas.
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Gas prices are rising
The price for gas traded on the gas exchange TTF in the Netherlands has increased in recent months. The commission believes that it will rise further and stabilize in 2025. In spring, the gas price was 30 euros/MWh, in the third quarter of the year it was 40 euros.
Russia still supplies significant quantities of gas to Europe. In 2023 around 15 percent of the gas EU. uses, down from around 40 per cent before the war.
Part of this will disappear at the turn of the year, when Russian gas will no longer be supplied via Ukraine. But this is volume that can be replaced by American LNG (refrigerated liquefied gas). When new export facilities come into operation, the US Energy Information Administration (EIA) expects that LNG exports from the US to the EU will increase. This will help to stabilize prices at a slightly lower level this autumn, but then it will rise further in 2025, the Commission believes.
It is only in 2026 that the Commission dares to predict that consumers and industry can get more even, lower energy prices. But that assumes that the EU succeeds in cutting gas consumption, developing renewable power and that no dramatic things happen in the LNG market.
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The Middle East is the problem
The situation in the Middle East is highlighted as the most current threat to the stability of the gas market. Today between 30 and 35 percent of the world’s LNG is transported through the Strait of Hormuz. A full or partial Iranian boycott could have major consequences for the LNG market and send prices up.
Nobody believes in a situation similar to the one in 2022, when the gas price passed 300 euros/MWh. Unlike two years ago, the EU now has gas reserves that are close to full. There was a 95 percent occupancy rate in October. In addition, the EU countries have carried out extensive development of renewable energy, invested in energy saving and obtained LNG on long-term contracts from the Middle East and the USA.
In its view, the Commission also points to the enormous costs both for the environment, people, but also financially from the effects of climate change. Specifically, they point to the flood disaster in Spain as the latest example.
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Alf Ole Ask is Energy and Climate’s correspondent in Brussels. Ask writes about what is happening in the climate and energy field in the EU, and how this affects us in Norway. Energi og Klima is the Norwegian Climate Foundation’s online newspaper. The position in Brussels is supported by Agenda Vestlandet, Fritt Ord and the Bergesen foundation.
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