Contract price and daily gas price further and further apart

The daily price of natural gas moves with the price of oil and therefore threatens to become negative. Who will store the surplus of natural gas?

As with the supply and demand of oil, the market for natural gas has been severely disrupted by the corona crisis. While demand has fallen sharply, the supply of renewable energy from wind and solar rose to record levels. And there was already a large supply, not because of a trade war but because of the particularly mild winter in large parts of Europe. 

Daily price depth
The day gas price explored new depths last week and even stood at 5,4 cents per cubic meter last Friday. The relatively high temperatures in Western Europe, in combination with liquefied gas that flowed our way from Great Britain in large quantities, were to blame for this. So the same question arises as with oil: who is going to pay for the storage of gas? There are various options in the Netherlands for filling underground fields with natural gas, but the reserve capacity appears to be finite.

EU price agreements
Unlike the price of diesel, the price of contract natural gas does not move quickly with the daily prices that are paid. This has to do with price agreements that the European Union uses for its climate policy: the EU sets the gas price twice a year. In order to better follow current day prices, this policy must be abandoned. The gas price consists of several components, namely, consumption costs, VAT, energy tax, ODE (levy for storage of sustainable energy) and standing charge.

Of all these components, the consumer can only influence the gas tariffs. The development of the gas price was relatively stable up to and including 1999. At that time, the price of a cubic meter of gas was between 20 and 30 cents. From the year 2000, prices rose sharply, mainly due to substantial VAT increases and additional levies and taxes. To then fall again to the price level of between 20 and 30 cents, depending on the company characteristics.

Groningen gas
The agreements made by the Dutch government regarding the phasing out of gas extraction in Groningen also play a role in the Dutch natural gas market. Binding agreements were made about this in the autumn of 2019.

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