Gas price continues to drop, but bills could rise again. The prices of the TTF index on the Amsterdam stock exchange continued their decline, which started in the last months of 2022, in 2023, bringing down electricity and gas bills. Prices are much lower, at least compared to the first months of the war in Ukraine. Italy and Europe exchanged a large part of Russian gas and filled stocks to the highest levels ever, again thanks to the lower consumption of Italians. However, since prices fell, consumption has recovered at a consistent pace, raising new fears for the coming winter of 2023-2024: if prices fall again immediately, the forecast for the future is upwards. And there are strong reasons to believe that.
The price of gas in 2023: a mirage?
In 2023, the price of gas fell from month to month. The TTF index of the Amsterdam stock market, which is the main reference for the formation of the gas price in Europe, has always gone down, with the exception of rare increases, contributing to the lowering of the bills. After the start of the war in Ukraine, natural gas prices experienced unprecedented increases due to dependence on Russian gas and the lack of alternatives on the market. However, after the peak of €342.8 per megawatt hour reached in August 2022, the price began a downward trend from mid-December, which continued into 2023.
Gas offers – and therefore corresponding prices – are falling, at least compared to the recent past. If we broaden our view to the months before the start of the war, namely 2021, we see that current prices are still twice as high. At the last close of Amsterdam TTF index futures for June 2023, the applied price was just under 30 euros per megawatt hour, the lowest level since November 2021. prices are even double the prices recorded at the beginning of 2021, for example.
Because the price of gasoline has fallen, but may rise again.
On the eve of the winter of 2022-2023, there were great fears about the availability of gas after the supply from Russia was cut off. Italy and Europe envisioned themselves in an energy crisis with out-of-scale prices and a lack of raw materials to stimulate and support the economy. Prices have reached record highs, but have fallen thanks to a particularly mild winter and diversification of supply to replace gas from Russia, which has kept consumption low.
For this reason, Italy and Europe consumed less and more gas than other supplier countries, primarily thanks to LNG, liquefied natural gas. For example, in 2023, the weight of partners from which Italy imports gas has changed: Algeria has replaced Russia as the country from which we import the most gas. According to the calculations of Today.it, in 2022 Russian gas decreased by more than 60 percent compared to 2021.
Low demand for gas in winter made it possible to easily replenish stocks, putting them at their highest level ever. However, in 2023, more affordable prices increased demand and consumption. In the chart below by ISPI researcher Matteo Villa, we can see the increase in gas consumption in recent weeks: the orange line shows the decrease in consumption from August 1, 2022 to May 2023; Peak values are the same period of 2021, with a decrease of up to 20 percent from the previous year. The blue line instead observes the trend compared to the previous 30 days: the curve goes upwards, underlining that savings are falling more and more.
Given the approaching winter, the target is to fill storage to 90 percent of capacity by 1 November 2023 and reduce consumption by 15 percent relative to the average consumption for the period between 1 April 2017 and 31 March 2022, as agreed in the Council of Europe. Level by Member States. If gas demand continues to rise, it will not be easy.
What will be the price of the next gas bills in 2023?
Although natural gas bills decreased in the first months of 2023 compared to previous months, the trend has changed. Rates for a typical custodial family as early as April 2022 were up 22.4 percent from March.
The regulatory authority for energy, grids and the environment (Arera) has yet to issue a price update for the next few months, but the trend in consumption and prices shows one thing: demand can increase too much compared to availability at these tariffs. market making the situation unsustainable. Without the reduction in consumption, Italy would not yet be in a state of energy security: in terms of security, the transition from Russian gas to independence and greater use of renewable resources is not actually complete.
ISPI estimates show that gas savings of about 15-20% should continue, compared to pre-war consumption in Ukraine, in order to avoid stock shortages in the autumn-winter 2023-2024 months. Therefore, prices are likely to start rising again in the coming months: futures for the coming months – the price at which gas was purchased in the future – is actually already higher than the current price and may even exceed 50 euros. Between December 2023 and January 2024.
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Source: Today IT

Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.