As the “Welt” reports, the economists Axel Ockenfels and Achim Wambach are warning of a collapse of the gas market this winter. The problem is clear: when it gets cold, demand for gas increases. But the higher prices will only reach consumers with a delay. Also, many people do not want to turn down the heating as much as they like.

“However, if both demand and supply are hardly swayed by ever-higher prices, it is possible that the market cannot identify a price that balances supply and demand,” the report quotes the short study as saying. “The market then fails in its central task.”

The researchers Ockenfels (Cologne University) and Wambach (President of the Leibniz Center for European Economic Research) warn of the onset of a vicious spiral should the market tip over. Massive payment defaults could mean that suppliers could no longer finance new gas imports. According to the economists, the gas storage facilities would then no longer be able to guarantee security of supply if they followed the standards of the market. A “threatening imbalance” could occur.

Although the problem is known in theory, there are hardly any publicly communicated solutions, according to the authors. “Answering what exactly happens when a market collapses has significant implications for current behavior and, by extension, the probability of a collapse.”

So far it is only known that the Federal Network Agency could announce the third and final stage of the national emergency plan in the event of a gas shortage. The authority becomes the gas distributor and decides who will continue to be supplied – and who will not. Read more about this here.

In their short study, the economists criticize the fact that the Federal Network Agency also wants to rely on the market in an emergency. The authority expects that the spot market will remain open for short-term gas trading. “Such reactions from trading platforms to extreme events are not known in the financial market,” says von Ockenfels and Wambach. The scientists fear that the gas exchange could suspend trading if prices collapse.

One possible solution would be so-called “shutdown campaigns”, in which companies reduce their gas demand when requested to do so. According to the authors, the gas demand in shortage situations could also be issued by issuing licenses “at fixed prices or in competitive processes”.

The Federal Network Agency should now assure companies that they will continue to be supplied with gas during the crisis in order to reduce consumption today. Whether the companies would also do this voluntarily remains to be seen. However, it remains important to deal transparently with the problem of a collapsing gas market.