"High gas prices not abnormal, gas price crisis may soon be over"

Stef Proost, business economist at KU Leuven, explains how he believes the gas crisis could soon be over. Among other things, he predicts that Russia "has forfeited a lot of credit with this import interruption and therefore can only sell natural gas at discount prices in the longer term". In the conclusion of his piece, he writes that "we" should not be blinded by the current high prices.

"In the longer term, these high prices create demand reduction
and supply increases by other suppliers for only a small price increase of natural gas compared to prices before the COVID crisis. This in itself is good news for the natural gas market and the electricity market and allows for temporary relief to the population with allowances now under the condition that the strong price signal is maintained."

Should the war end, he expects Russia to want to restore gas supplies to Europe "because it has no other customers willing to pay as much. Result: supply at discount prices, Proost thinks. "European natural gas prices could then differentiate between reliable and more expensive gas and less reliable and cheaper gas from Russia. In the end, natural gas prices could be lower than before the COVID crisis."

Proost believes the heavy energy investments on the table should be reconsidered. "We are only six months into the Ukraine crisis, and a long-term perspective is useful here." Read the whole piece here. (NL)

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