Unstoppable price drop in energy market

The coronavirus has the whole world in its grip, including the energy market. Since January, the price of oil has fallen from around $70 a barrel to just above $30 a barrel. This is the lowest level for the past four years. How can you as an agricultural entrepreneur act on this?

The aviation and transport sectors have almost come to a standstill, reducing the demand for fuels. One is the result of the other. Add to that the fact that Russia and the Petroleum Exporting Countries (OPEC) have actually increased oil production, rather than lowering it as you might expect with a decline in demand. The result is clear: an unstoppable price drop.

Gas rates down
The gas tariffs also set new lows. Many LNG ships have come to Europe in recent months, because there was little demand for gas from China. It is doubtful whether demand from China will pick up quickly. China is the driver of the economy, so the demand for coal, gas and oil remains low in other countries.

In addition, all precautions regarding corona will also reduce or stop production processes of industry in Europe, so that the demand for gas will decrease and the surplus will only increase.

Electricity market
In addition to the fact that lower production in factories affects the gas market, it also affects the electricity market. After all, with a lower production, less CO . is produced₂rights needed. These rights will therefore become cheaper, causing the rates for electricity to fall.

In the meantime, spring has arrived, which means that, in addition to wind energy, the solar panels will start to do their job again. Both will put pressure on the supply side. For all the above reasons, now is the time to take advantage of the low rates. This period is the best time for livestock farmers to buy energy and to have the best guarantee on competitive prices.

By thinking ahead, benefits can be gained by purchasing energy in advance for the coming years. But whatever situation you find yourself in, health remains the most important thing.

Kees van Ham
Consultant intensive at DLV Advies

DLV Advice

DLV Advies is an independent consultancy for entrepreneurs, companies and organizations in the agricultural sector. In addition to individual advice, DLV supervises study groups and is active in various Agri&Food projects.

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