After a costly winter and spring. Gazprom threatens to tighten gas taps to the Czech Republic

Will a cheaper spring come after a costly winter? So far this is not the case, at least in terms of energy prices. After weeks of relative calm, gas prices and therefore electricity prices are once again reaching new highs, and it looks like we really need to start getting used to the new price normal. This is, compared to last year, three times the price of electricity and up to five times the price of gas.

Prices are currently not increasing emission allowances, which were often the culprit, particularly in the second half of last year, now that the market is ruled by the conflict in Ukraine and the threat of disruption of gas supplies Russian to Europe.

“It just came to our knowledge at that time. On Wednesday there was a report that Germany had launched a crisis cell, in which plans were being prepared in case the parties were not Disagreement would mean that the gas will physically run out and prices will continue to skyrocket,” Jiří Gavor, energy consultant and CEO of ENA, told Forbes.

In addition, Russian President Vladimir Putin on Thursday signed a decree that foreign buyers must pay for Russian gas in rubles from Friday, April 1. Otherwise, deliveries will be stopped.

But that’s not all. The independent Russian daily Kommersant reported earlier on Thursday that Gazprom is considering stopping gas supplies to “non-friendly” countries and assessing the possible consequences of such a decision.

Since Czechia was on the list of countries hostile to Russia due to the Vrbětice affair last year, the suspension of gas supply would affect our republic. However, since the beginning of March, the whole European Union has been on the list to support Ukraine in the current conflict.

“It just came to our knowledge at that time. Whatever the prices, no matter how high, they would certainly not reach all customers. So emergency steps would have to be activated, restrictions on complete supply cuts,” Gavor describes the bleakest but not at all unrealistic scenario, and he points to the currently almost empty underground gas storage facilities in the Czech Republic.

“In such a situation, it would be basically impossible to fill the empty tanks with gas for the winter. This would make the situation even more crisis-related,” he said, adding that neither the agreement with the United States, which promises to send 15 billion cubic meters of LNG gas to Europe per year, a tenth of the gas volume of Russia, nor the possible agreement with Qatar not only the Czech Republic, but also the neighboring Germany.

On the one hand, Qatar already has long-term contracts with Asian countries, and on the other hand, Czechia is not the only country interested in gas there. And even if the supply of this Qatari gas were agreed, LNG terminals in Europe would not be able to import it. Especially at a time when American gas is beginning to arrive in Europe.

According to a recent statement by Prime Minister Petr Fiala (ODS), Czechia has gas reserves for about a month. This is barely a third of the standard reserves held. For example, such a Poland holds gas reserves until the end of the year.

Speculation that supplies will stop, even for part of Europe, has pushed gas prices to new highs. The annual gas contract on the Prague Energy Exchange reached a new all-time high of 89.1 euros per megawatt hour on Thursday. A year ago at this time, its value was one-fifth.

Evolution of the gas price on the Prague Stock Exchange PXE from mid-February to the end of March in EUR/MWh.

And since gas is one of the factors in the formation of electricity prices, this energy product is also on the rise. The annual contract rose to 186.1 euros per megawatt hour and has only kept two euros since its record. Last year the price of electricity was by a third, so current values ​​can be expected to be pushed back into higher energy bills, even after several rounds of price increases.

Not only are households grappling with high prices, but they are first hurting businesses, which have to deal with them either by cutting margins or by raising prices. This is one of the reasons why the general inflation rate exceeds ten percent.

“The growth in gas prices is terrible, its price has increased fourteen times since February last year,” Jan Světlík, owner of the Vítkovice Holding steel plant, whose products are exported, told Forbes in the first fortnight of March on spot prices in 130 countries. around the world.

The State is therefore preparing targeted measures which should relieve both businesses and households. The Minister of Industry and Trade, Jozef Síkela, will present the thirteen-point plan in detail in the coming days or weeks.

According to Síkela, the first and most important measure of the new package is to increase the subsistence minimum by ten percent from April 1.

The state also plans to offset indirect costs for companies in energy-intensive industries. According to Sikela, the European Commission approved the program last week, it is now a question of expanding the list of sectors that could benefit from it.

However, due to the current threat of a stoppage of gas from Russia, Síkel was called by the crisis unit on Friday.

The arrival of spring and summer temperatures, which generally reduce energy intensity, should relieve energy prices. However, the main driver of price movements in the market will remain the conflict in Ukraine.

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