The decrease in gas prices in Europe, normality! The increase in gas prices in Romania, normality!

Romania is a country of extremes. The journalistic analyzes are no exception. The latest example is the explosion of worrying analyzes on the increase in gas imports and prices, according to statistics published for Q1/2019. I believe that this “panic” would have been much better presented prior to the publication and immediately after the publication of GEO 114, i.e. at the end of last year. The effects of GEO 114 were extremely predictable; in fact, the Intelligent Energy Association has presented them through numerous analyzes published:

• Capping the price of gas does not bring lower gas prices in the winter of 2018/2019, or in the summer of 2019, analysis issued on December 19, 2018 (https://asociatiaenergiainteligenta.ro/?p=1538&lang=en)
• Reintroduction of the domestic production-import basket favors gas imports in Romania, analysis issued on December 20, 2018 (https://asociatiaenergiainteligenta.ro/?p=1540&lang=en)
• Under the cover of righteous and commendable purposes, under the lenient influence of public opinion according to which “the drafting of legislation was wrong again“, or “the persons who drafted the legislation do not have knowledge in the field“, we can believe that under the implementing rules of GEO 114/2018 it is intended to complete the action started in 2012 – the replacement of the Old “Smart Guys” in energy with the New “Smart Guys” in energy (https://asociatiaenergiainteligenta.ro/?p=1645&lang=en)
• The application of GEO 114, the plan to amend it, the intention to postpone it specifically establish in April 2019 a honeymoon for gas importers, which in absence of these measures probably wouldn’t have obtained any money in Romania in April 2019 (https://asociatiaenergiainteligenta.ro/?p=1658&lang=en).
• Through our attitude we will continue to import gas from Russia instead of capitalizing on our own (https://financiarul.ro/2019/05/09/de-ce-importam-gaze-scumpe-de-la-rusi-in-loc-sa-le-valorificam-pe-ale-noastre/)

Today, we analyze retrospectively and worry about the abnormality that was predictable. What happens today on the gas market is normal, given the conditions in Romania. It is the outcome of GEO 114 and “smart guys” who act and take advantage of the “loophole” in the gas market created this spring through numerous legislative actions, facing an increase in gas prices, at a time when it naturally drops. In fact, if we analyze gas prices in May 2019, we will notice that in fact it followed the same trend as the price on Vienna exchange.

Thus, an approximate calculation of the weighted average price of gas in May 2019 on the Romanian market:

• RON 95/MWh (approximate weighted average price of gas purchased traded on BRM in May 2019) * 5% (the approximate share of gas consumed in May 2019 traded on BRM)
• + RON 87/MWh (approximate weighted average price of gas purchased other than that traded on BRM in May 2019) * 75% (the approximate share of gas consumed in May 2019 not traded on BRM)
• + RON 68/MWh (the price of gas purchased for population and thermal energy for population) * 20% (the approximate share of gas consumed in May 2019 not traded on BRM)
• = RON 83.6/MWh.

The price of gas on the Vienna exchange is around RON 81/MWh, and if we consider the cost of gas transmission from Vienna, we can notice that the average price in Romania follows the trend of the one on Vienna exchange. However, this abnormality, normal given the conditions in Romania, has the following consequences:

• the “crossed subsidy” between the price of gas for household customers and non-household customers determines an increase in inflation, respectively a decrease in the purchasing power of the category intended to be protected – the population;
• the increase in gas quantities from import;
• the increase in the price of imported gas;
• affecting the domestic gas production.

Translation from Romanian by Romaniascout.