Europe’s switch to spot gas market has led to sharp price hike

Yuriy Solozobov, head of the Centre for International Energy Policy, explained in an interview with that the record rise in gas prices in Europe occurred due to the transition of European countries to the short-term spot market instead of long-term contracts

Europe's switch to spot gas market has led to sharp price hike

“There has been a logical breakdown of pricing in Europe due to the rejection of the take or pay principle [when the buyer undertakes to pay the entire contracted volume of goods] in favour of the spot market [when payment for a deal is made immediately]”, –  the expert explained.

According to him, prices on the spot market are much lower than long-term prices because of the availability of surplus fuel, which is traded cheaper. However, because of the entry into the market of speculators who resell the already contracted volumes of gas, fuel prices have broken the historical record of $1,920 per thousand cubic meters of blue fuel.

Analysts at the British magazine Financial Times pointed out that the cost of gas on European markets has dropped significantly after Russian President Vladimir Putin said he was ready to help stabilize energy prices.


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