The dictatorship of gas. Some reflections on price and speculations (by G. Fauceglia)

The dictatorship of gas. Some reflections on price and speculations (by G. Fauceglia)
The dictatorship of gas. Some reflections on price and speculations (by G. Fauceglia)
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It is very difficult to explain in a few lines the current dynamics that have led to the dramatic increase in the gas bill, with the dramatic consequences that we are forced to witness for businesses and families.

It remains appropriate, first of all, to dispel the belief, moreover in Italy confirmed by the many “singers” of the Great Motherland Russia (sic!), According to which the increase in bills is only the result of the war in Ukraine, with the employee “reasoning “That it is sufficient to consent to Putin’s expansionist and imperialist aims to definitively remedy the situation. It is forgotten, indeed, that even before the war, the Tsar had ordered his men to intervene on the Dutch gas market, thus causing a certain rise in prices.

After all, wars are also being prepared on the markets, and Europe’s fault lies precisely in not having noticed this situation in time and those economic signals that prepare for conflicts, which today are increasingly “global” or not referable only to confrontation war. Basically, while Russian blackmail is an aggravating circumstance, it must be recognized that the invasion of Ukraine has transformed the military confrontation into a real market war.

The formation of the price of gas remains a real labyrinth, which I will try to summarize in my reflection. First of all, we must start from the TIF (Title Transfer Facility), which indicates the Dutch wholesale market, one of the largest in Europe, because the location of this country allows the transfer of the natural resource to Germany, the United Kingdom, France and Italy (instead, Spain and Portugal use the regasifiers, which transform liquid gas from Qatar and America).

The negotiations on this market are linked to the large import contracts, and the prices are strictly dependent on the so-called petroleum derivatives replaced by natural gas (even if, in some moments, the prices diverge from each other).

In this context, the importers decide to increase or reduce the quantities of Russian gas also on the basis of the price that is formed on the market. In fact, all these contracts are characterized by the presence of a clause known as Take of Pay, which oblige the purchaser to pay the payment of a price referring to a minimum quantity of gas already defined, and even if it is not considered to be withdrawn, and only above this threshold is a certain flexibility in the price realized.

Moreover, some supplies with Gazprom include the clause of Front Month or the price of gas in the following month: in essence, the price of gas is determined one month in advance of the actual supply, and to this dynamic are then linked securities traded on the market whose object is a real “bet” on the increase and on the decrease in price.

The dynamics remain even more evident, if we consider the circumstance that with the war, the price spot it increased dramatically also because it was preferred to withdraw Russian gas with long-term contracts, favoring a real attraction exercised on the financial markets due to speculation on “bet titles “.

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This explains why the simple announcement by the European Union to set a “cap” suddenly caused the price of gas on the market to drop. In short, speculation on securities and war profits have led, in an unprecedented combination, to the current dramatic situation, against which Europe has not been able to react adequately.

A first solution, even if complex also for legal reasons, could lie precisely in the determination of the “ceiling” on the price of gas or in the introduction of a mechanism that allows to act as the ECB does on the financial markets or with the creation of a large Agency able to operate as a single large buyer, capable of influencing supply and demand, thus allowing to “govern” the price.

These are choices which, however, must overcome reluctance (such as the Hungarian ones) and national interests (such as Germany or the Netherlands, the latter directly involved in the advantages created by financial speculation); but it is an obligatory path today, in the absence of which the same founding and solidarity “reason” of the European Union would end up.

Giuseppe Fauceglia

The article is in Italian

Tags: dictatorship gas reflections price speculations Fauceglia

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