MOSCOW (Pakistan Point News / Sputnik - 07th October, 2021) Russian President Vladimir Putin has demonstrated a responsible approach by stepping in to stabilize the gas market as Europe struggles with volatile prices, Werner Antweiler, a professor with the Sauder school of business at the University of British Columbia, told Sputnik.
Natural gas prices have been surging in the European market over the past few months, spurred by growing energy demand amid an economic recovery after months of coronavirus lockdowns, as well as a limited supply. Earlier in the day, the futures rates fell below $1,000 per 1,000 cubic meters for the first time this month after hitting a record high of $1,937 per 1,000 cubic meters on Wednesday.
"Western Europe has been moving increasingly towards spot trades. The result is a trade-off: greater volatility in natural gas prices versus greater reliance on a dominant supplier � along with the political entanglements this entails. President Putin intervened yesterday and offered to help stabilize natural gas markets. This is the responsible stand to take as the excessive price volatility is ultimately neither in the interest of Russia nor the European Union," Antweiler said.
Speaking of the consequences of the crisis for Russian energy giant Gazprom, which was not able to supply more gas beyond its contract obligations when needed, the expert suggested that it will likely lead to more calls for diversification and renewed efforts to expand LNG import infrastructure.
"As far as Nordstream 2 is concerned, the current situation cuts both ways: on one hand, additional supply capacity based on long-term contracts could stabilize prices, but is also puts a bright light on the lack of import diversification. The underlying struggle is about the role of spot trades versus long-term contracting in natural gas markets in Europe," the expert continued.
On Wednesday, Putin tasked Energy Minister Nikolay Shulginov with ensuring gas supply commitments are fulfilled. Gas is transported to Europe through Ukraine, under current agreements. Putin stressed that the terms of the contract must be respected, even though Gazprom may think it makes more sense economically to pay the fine to Ukraine and get to boost the amount of gas pumped via new pipelines. The president also noted the need to consider a possible increase in gas supply on the market, but urged caution to avoid speculative excitement.
Outgoing German Chancellor Angela Merkel has not ruled out that Europe might have placed an insufficient number of orders for purchasing Russian gas, with Moscow complying with all its commitments.
