Energy Crisis What drives up the price of gas?

5 mins read

The costs of gas prices to customers are examined in an essay written by Jan Hauser and posted on the faz.net website. How the final price is determined and what expenses buyers might anticipate… Here’s that article.

The German Federal Network Agency fears that the end-customer price for gas will triple. But how exactly is this made up – and what costs should consumers be prepared for?

The price of gas has already increased significantly compared to previous years and will continue to rise. A multiplication is feared above all because of higher procurement costs: These initially became more expensive last year due to a surge in demand around the world and, since the Russian war of aggression in Ukraine, also due to uncertainty about gas supplies from Russia.

What is the end customer price now and what costs should consumers be prepared for? According to a calculation by the German Association of Energy and Water Industries (BDEW), natural gas costs for a single-family home with an annual consumption of 20,000 kilowatt hours averaged around 230 euros per month as early as April. That was roughly double the cost in 2021.

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Wholesale gas prices have already risen significantly

This increase is mainly due to higher trading prices, which raise the share of procurement and distribution (see chart). In previous years, the state share of the gas price still accounted for just under the majority of the end customer price: Value-added tax with its 19 percent surcharge accounts for 16 percent of the final price. This is followed by the network charge, including metering and metering point operation, and the natural gas tax of 0.55 cents per kilowatt hour. The network operators pay the concession fee to municipalities for the use of the routes. Since last year, a CO2 price of currently 0.55 cents per kilowatt hour, which will rise next year, is intended to make carbon dioxide (CO2) emissions more expensive and thus reduce them.

Energy Crisis What drives up the price of gas? 1

The extreme price increases on the gas market have not yet reached many German consumers. Wholesale gas prices have already risen significantly more: After around 20 euros per megawatt hour in previous years, the wholesale price had settled at around 80 euros per megawatt hour at the beginning of June. As a result of the gas flow from Russia, which has only been throttled and is currently stopped, the price has risen to around 180 euros per megawatt hour most recently.

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These surcharges will gradually reach end customers because suppliers generally have long-term contracts that have been concluded at lower prices. The wholesale increase points to a multiplication of end-customer costs. Klaus Müller, President of the German Federal Network Agency, is talking about a tripling of the markdowns in the coming year. The consequences of the war in Ukraine have not yet been taken into account in the current heating cost statements.

Now energy companies have to replace the missing part of the cheap natural gas from Russia with expensive purchases in order to continue supplying customers. This could lead to higher gas prices sooner. To compensate for these losses, Germany’s largest gas importer Uniper is relying on government assistance. The group is currently reducing specially booked gas volumes in its storage facilities in order to supply customers with gas and secure Uniper’s liquidity.

In the industry, this is one of the reasons why the overall filling level of gas storage facilities is currently not increasing and stands at 64.5 percent. According to the Initiative Energien Speichern (INES), the association of gas storage operators in Germany, large volumes of gas are being stored at the same time. “The gas storage level is currently falling, however, because even larger quantities of gas are being withdrawn from storage at the same time,” INES Managing Director Sebastian Bleschke said in response to an inquiry. Larger delivery volumes of liquefied natural gas (LNG) would be needed for refilling.

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Salih Demir

Salih Demir lives in Germany. He is interested in politics and economy. Germany editor of -ancient idea- fikrikadim.com

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