The European authorities were able to qualitatively prepare for the upcoming heating season. However, the nature of gas purchases by European companies could create new risks for EU energy systems if accumulated gas reserves are depleted too quickly. This is reported by Bloomberg with reference to market participants and European officials.
The problem is related to the fact that the authorities of European countries practically do not control the accumulated gas reserves. For example, in storage facilities in the Netherlands or Italy, only 10% of fuel stocks are managed by national governments. The remaining volumes are under the control of private companies that can resell these capacities at any time and are only interested in maximizing their own profits when concluding a supply contract.
The publication notes that this situation creates risks in crisis situations. For example, when Germany runs out of its own reserves and wants to replenish them with stocks in a neighboring country, countries will begin to compete among themselves for these volumes, which will lead to a jump in prices and market tension. Additional difficulties are associated with the fact that not all European countries have their own storage facilities and are accustomed to borrowing fuel from their neighbors. Such hubs, in addition to Italy and the Netherlands, include, for example, Austria, Hungary and Slovakia.
At the same time, their neighbors Poland and Germany suffer from a lack of storage facilities, so in the event of a harsh winter, these countries are at risk of becoming the epicenter of tension. Moreover, Europe has never used domestic gas systems for such a significant cross-border supply, experts say.
“The practical capabilities of the system have never been tested before. Much will depend on the severity of this winter,” said Graham Friedman, an analyst at consulting firm Wood Mackenzie.
In addition, the depletion of reserves this winter to the level of 10% of storage occupancy may intensify competition among EU countries in preparation for the next heating season, Friedman is sure. The agency emphasizes that there is no full-fledged data on the state of the EU gas market, but most of the current reserves are assigned to national utilities, which will redistribute fuel between businesses and households. But a significant part of the gas, the agency notes, is still held by trading companies – for example, Glencore, Vitol and Trafigura Group. These companies are interested in maximizing profits, so they will not rush to sell their own volumes.
However, in the event of a crisis, national governments can take advantage of the declaration of emergency and begin to withdraw gas contrary to the positions of traders. This is what Germany can do, in particular. True, the German authorities expect that this will not come to that, since the government has been preparing for a harsh winter all summer, nationalized energy capacities and purchased gas from various sources. The European authorities are still counting on the market, which should adequately respond to imbalances in supply and demand within the EU. It is for this reason, in particular, that the European Commission abandoned the idea of introducing a cap on oil prices. However, in case of crisis situations, the current plan assumes directive management of gas flows in manual mode.