Consumers in Germany have not only had to dig deeper into their pockets for electricity since the beginning of the year, gas also became increasingly expensive with the start of the war in Ukraine. On the gas market, the price is now falling to a low. However, private households hardly benefit from this.
With Russia attacking Ukraine, gas became increasingly expensive. Germany is in an energy crisis. Gas price brakes, LNG terminal expansion and savings requests from the Ministry of Economic Affairs are the German reaction to this. Ever since Russia stopped supplying gas to Germany, the subject of gas has been on everyone’s lips anyway. Both industry and private households are affected by the associated price increases. Shortly before the turn of the year, however, comes the first good news in months: gas in Europe is cheaper than it has been since the beginning of the war.
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Four days after Christmas, the TTF futures contract for Dutch natural gas fell to EUR 76.18 per megawatt hour. European natural gas was last this cheap in February. And the downward trend in wholesale continued: In the new year, prices fell to their lowest level in almost a year. This means that gas is currently cheaper than before the war: On Monday, the TTF futures contract for Dutch natural gas started trading at EUR 70.30 per megawatt hour. At the beginning of March 2022, the TTF reached a high of 345 euros per megawatt hour of gas. At the end of August, the price was again almost as high.
Similar to the recent drop in electricity prices on the Leipzig electricity exchange, the weather also plays a major role in the wholesale price for gas. The turn of the year in Germany was almost like summer. The German Weather Service (DWD) recorded a temperature record on New Year’s Eve. It has never been so warm on December 31st. In Wielenbach in the Upper Bavarian district of Weilheim-Schongau, for example, 20.8 degrees were measured around 2 p.m. – 3.8 degrees above the previous temperature record.
The warmer the weather, the less German households have to heat. Data from the comparison platform Check24 shows that four percent less energy was used for heating from September to December 2022 than in the same period last year. The need for heating was reduced over the months, mainly due to the mild November and the record temperatures at the turn of the year.
This lower consumption ultimately relieves the suppliers. The gas holders hardly had to be touched and remain well filled. The combination of high levels and warm weather are having an impact on gas trading prices. Wholesalers in particular react sensitively here: Prices are falling quickly.
In addition, more energy has recently been generated from wind power. This has further reduced the consumption of gas to generate electricity. This is also due to favorable weather conditions and is depressing wholesale gas prices. All of this raises hopes, especially among consumers, that they will be relieved of their gas bills. But is that realistic?
Just like with electricity, the suppliers also increased the prices for gas on January 1, 2023, in some cases massively. But as with electricity, the same applies here: consumer prices for gas lag behind wholesale prices.
Because Germany is not a gas country, so the raw material has to be imported, for example by energy companies like Uniper, long-term contracts based on long-term average prices have to be concluded. The war in Ukraine has now resulted in large volumes of the imported gas being lost – the pipeline gas from Russia. In order to counteract such a shortage, suppliers make short-term purchases on the spot market, such as the electricity exchange in Leipzig.
The problem: gas prices shot up because of the war and at times reached record levels. The advantage: despite the new circumstances, purchasing on the spot market still only accounts for a small part of the gas volume consumed.
The current price that private households have to pay for gas is made up of the long-term average prices of the long-term contracts concluded by the suppliers and short-term market movements in wholesale. In order for the low prices on the spot market to be reflected in consumer bills, the long-term contracts must first expire.
How quickly the fall in wholesale prices affects the gas bills of private households also depends on the respective gas tariffs. In the case of basic supply – i.e. whoever gets energy from the energy supply company that supplies most household customers in the grid area with electricity and/or gas – the supplier can adjust the gas price on an ongoing basis. This type of contract can be terminated at any time within a period of two weeks.
The situation is different for tariffs with special customer contracts. Here the prices are guaranteed and limited to one or two years. If necessary, you can get cheaper prices here and have contract conditions that are adapted to your needs. However, a contract of up to 24 months can also exist for “special customers”. Price changes can therefore only take effect after the guarantee has expired.
Price changes at the wholesale market are reflected at different speeds depending on the tariff and can also vary in severity. However, there is always a delay due to the long-term contracts of the suppliers. The current price fluctuations in the tariffs will not be noticeable until 2024. So the following still applies: stay patient.
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