Expert: Norway can cut gas prices without problems
Several European countries have asked Norway to cut prices, at the same time the EU is discussing price caps. Prime Minister Jonas Gahr Støre (Ap) opened up a discussion about this in an interview with Financial Times.
Professor Franziska Holz at the energy department of the German Institute for Economic Research (DIW) points out that Europe buys gas from several suppliers, and that a Norwegian price cut alone will not affect the entire market.
– Individual buyers of Norwegian gas, such as the German import company Uniper, can potentially reduce the import bill if the Norwegian gas is not sold at market price, but at a lower price, says Holz to NTB.
She says that there will be a change in course, as the European Commission has ensured that it is the market price that prevails in long-term contracts.
– Critically important with Norwegian gas
Norwegian gas exporters can lower prices without risk, says Holz.
– The extreme price increase is not cost-driven, and that explains why countries ask for this: Norwegian gas producers can cover their costs several times over with today’s extreme market price, she says.
Holz says that Norwegian gas deliveries to the EU are critically important now.
– In the absence of Russian gas and with the risk of varying supplies, the Norwegian supply is what ensures that Europe’s access to gas is stable, says Holz.
– As the production cost in Norway is far below the current market prices, I do not expect that a price reduction will affect Norwegian gas supplies, she says.
– Norway wanted to make money
Holz says that the market knows and recognizes that Norway has delivered what it is possible to deliver of gas in the past year, which Støre also pointed out in his interview with the Financial Times.
– Norway did not do this out of self-interest, but because they could profit from the very high prices, says Holz.
As the energy market – like many markets – is such that it is the most expensive production cost that sets the price for the entire market, it is now the price of electricity produced from gas that drives electricity prices up in Europe.
The EU is discussing several measures, including taking profits from the cheaper production methods and using them for electricity subsidies, for example.
– I fully understand that Europe is now having a thorough debate about how the energy markets work, says Prime Minister Støre to the Financial Times.