Natural gas prices expected to increase by 10 pct this winter and up to 40 pct in the winter of 2019

The price of natural gas is on the rise and it is expected to be 10 percent higher for population this winter and 40 percent higher in the winter of 2019. The price will be higher for the natural gas from internal production and for the imported one, according to the analysis made by Smart Energy Association (SEA) based on the Romanian Commodities Exchange (BRM).

Also, based on the transactions carried out on BRM, the prices for gas will be higher in the northern part of the country, where the rise may be up to 13 percent.

Global trends show that the gas prices are on the rise all over the world. The future prices for gas in Q4 2018, the last quarter of the year, are 10 percent higher than those in Q4 2017, as it is seen on the CEGH Scholarship in Vienna, the nearest gas exchange to Romania. Past experience show that this future price is used as a benchmark for the price of gas in the Russian Federation sold in Central and Eastern Europe.

The 40 percent increase estimated for next year winter is seen in the trend from USA gas market future prices. In some analysis the increase may be at 8 to 10 percent, but the trend shows that it can go up to 40 percent.

Historical prices

The price of natural gas has reached a peak in 2012 and after that it has dropped to levels similar to those in the 1990s. After six years of low gas prices the world is expected to enter in a new era of higher prices. This period of cheap prices was used by companies and countries to reduce costs and invest in infrastructure. A good preparation for the next period, that of increasing prices.

”Unfortunately, Romania did not take advantage of this period, hoping that gas prices will remain forever lowered,” notes Dumitru Chisalita, founder of SEA.

The lack of a strategy and the failure to enforce the existing market liberalization legislation to ensure the correct price setting on the market will find many gas consumers unprepared for the next period when gas prices will increase. Also, the use of populist measures in the past to solve consumer vulnerabilities of gas, will only add to the problems in the future.

”The draft amendment to the gas law, which is in Parliament, not only does not come with solutions to prepare Romania for this new “era” of gas, but contains articles that will lead to escalation of costs, respectively an increase in the price the final consumer”, says Chisalita.