Europe now has so much natural gas that prices just dipped below zero | Hacker News Reader

Europe now has so much natural gas that prices just dipped below zero

lite.cnn.com

252 pointsrntn187 comments

Normally you run storage facilities neither all the way full nor all the way empty: you want to be able to smooth out fluctuations in supply and demand. Because of the war Europe is running gas storage near its upper limit, which means we should expect less flexibility and more price volatility: they won't want to draw them way down if we get a serious cold snap, and they have nowhere to put extra gas if it's warmer than usual. The latter happened, there's nowhere to put incoming gas, so spot prices fell below zero.

Great, succinct explanation - thanks.

>you want to be able to smooth out fluctuations in supply and demand.

Can you say a bit more about the "you" mentioned?

I can imagine "you"s who care only about having heating during wintertime.

From context, it seems that the "you" in question is "a company that runs a natural gas storage space." As a company with fiduciary responsibilities, they likely can't concern themselves too much with the problem you mention.

European utilities are often public utilities that are nationalized in some way, not strictly corporate businesses.

For good. Remember Texas electricity costs soaring?

Not sure what you're talking about, practically every major EU energy org is a corporation (traded on an exchange or even an Ltd-like private company), only sometimes there's a bit of it owned by a state... Can you give some examples of major energy organizations that are wholly-owned by a state (or at least majority-owned) or actual organizational units of a state?

Vattenfall.

https://en.wikipedia.org/wiki/Vattenfall

Fortum, 50.x% owned by the finish state.

https://en.wikipedia.org/wiki/Fortum

Equinor, 67% Norwegian government.

https://en.wikipedia.org/wiki/Equinor

Ørsted, 50.x%. Danish state.

https://en.wikipedia.org/wiki/%C3%98rsted_(company)

EDF, 87% French state.

https://en.wikipedia.org/wiki/%C3%89lectricit%C3%A9_de_Franc...

Good examples. But what about the rest of the continent? And while these companies are the largest on their home markets, they're not the only ones there, are they? And they operate on foreign markets where they are a corporation like any other. For this we should consider only the home-based operation where they can have influence on the state policy, IMHO.

And what about EU rules against unfair competition? They basically force these companies to behave like any other market participant and forbid the state from giving them much/any help. This had real consequences in Poland and Czechia where the states wanted to help nuclear projects (in case of Czechia it was CEZ - the partially state-owned energy company) but the EU stopped it.

The standard "smooth out the fluctuations" approach gives an extremely low probability of running out of fuel during the winter at a reasonable cost, but only assuming sufficient fuel imports. Because of the loss of Russian gas and not having sufficient LNG infrastructure to make up it, Europe will burn gas faster than replacement when it's sufficiently cold, and if the cold weather lasts long enough they could run out of gas. So they're now using a more expensive and wasteful strategy of keeping storage closer to full, exactly to reduce the risk of people not having heating during winter.

Given the disrupted gas supply, what alternatives are there to the "expensive and wasteful strategy" ?

I do think expensive and wasteful is the right choice here.

Just because you’ve got no other option’s doesn’t mean a strategy isn’t “expensive and wasteful”. It just means you’re desperate, so you’ll happily eat the cost.

But long term I would expect Europe to use a much less expensive and wasteful strategy. But obviously it takes time to build and deploy alternatives.

The strategy in question is, more generally, moving volatility in the shoulders of the distribution to the central region. It knowingly subjects us to worse-than-normal price movements in the stable regime so that price movements aren't as crazy when we go out to more extreme regimes.

The alternative would be to, well, not do that. Or any other of a number of volatility-controlling strategies. I don't think any of them are better, but there's always an alternative.

One of the important factors in ensuring heating is keeping the movement of gas from being too unpredictable. One of the important factors in keeping it affordable is having a stable supply.

Stable supply is not what we are looking at here.

Storage is a factor in supply. The storage is having trouble, so this costs more money, which means it's going to be harder to afford heating even if the gas doesn't run out. That's why smoothing out fluctuations is relevant to people that "only care about having heating".

What do you mean by "storage is having trouble"? Are you thinking of an alternative?

The price going wonky is the trouble at hand.

I am not thinking of an alternative unless "having more storage" counts.

They mean they don't have the capacity to offload all the waiting tankers due to the on-shore storage tanks being mostly full. The ships sitting idle costs money. In an effort to stop the bleeding from the idle tankers, they drive the costs of the fuel down in an attempt to lower the supply in the on-shore tanks so they can offload the waiting tankers.

In a normal scenario they would have enough slack in the on-shore storage to absorb the ebbs and flows of incoming tankers and outgoing usage without resorting to idle tankers in the ocean.

This is a good question, I don't understand the downvotes or the responses (1 exception). Gas is delivered to customers via a whole system of players, each who have different motivations and incentives. How you arrive at the current state of "more gas in storage than otherwise" is, at least on the surface, an interesting question when one considers that complexity.

Are you saying that by holding onto so much gas that there’s less in active circulation therefore it leads price increases?

He is saying having less available slack increases volatility:

It led to a recent price drop because when gas usage was lower than expected there was nowhere to store the excess supply as would usually be done.

It will lead to a price rise if usage is higher than expected because they won’t want to risk depleting stores too much.

To expand on this a bit, oil and particularly liquefied natural gas (LNG) production facilities are hard to stop and restart. Many systems need to be at a particular temperature, hydrates can form in gas pipelines during long shutdowns and thus need chemical back injection to manage, hot/cold cycling of equipment cause thermal degradation and many other challenges.

So a lot of design work for oil and gas production facilities is around minimising shutdowns. A large part of this is working out storage capacities, and for LNG, the shipping rates. If the LNG carriers (tankers) are unable to offload at a receiving terminal there is a higher chance the LNG loading terminal will reach tank tops. Tank tops at the loading terminal means the upstream production facility will need to turn down or stop all production. Given the high costs (capital and production opportunity) that incurs for the production facility, it might be better to take a short term loss for a few cargoes to prevent the tank tops at the loading terminal and thus a production shutdown.

Yes, and: natural gas is a byproduct of oil production. For decades, natural gas was flared off as an unwanted byproduct. It is still flared off today when it's uneconomical to capture it.

Unlike other goods where supply will drop if there is insufficient demand, a lot of natural gas gets produced regardless due to oil production. It gets sent to market because there is no local storage capacity and the alternative would be to flare it off.

Shenanigans in the futures market aside, this contributes to (temporary) oversupply driving prices negative.

The same warehousing phenomena result in this negative price probably not lasting very long. Barring an extremely warm next few weeks, expect the price to be back up soon.

another big reason is the difference in pricing between pipe and shipping. With pipe it's instant while with ship the spot pricing is before the ship start it's journey from the filling port. Added to the complexity that in EU all the ships with natural gas are stuck at ports because unloading capacity has not been upgraded.

Combining both has reduced the spot prices so that more gas is not sent. It does not reflect the real demand which we are going to have in few months or the volatility.

if you like volatility, natural gas is the best product. One contract is around $60k and could net you thousands in minutes if you play it right.

Some important caveats - the storage squeeze is only in Spain - storage facilities are pre-booked, meaning the if you want to buy some gas you should've booked the some storage beforehand. Storage supply is a non-elastic on the shore.

Dutch gas spot prices for delivery within an hour going negative may be telling us something about the spare storage capacity connected to that network though.

The problem is as for most of the current "Supply Chain Crisis" that the core of the problem is with logistics and distribution not raw supply, i.e. it doesn't really matter how many Liqid Gas carriers that show up of the coast of Europe as there is nowhere to unload it as the networks are designed around just in time supplies of gas flowing out of the pipelines from Russia.

This distribution problem is what is sending the price of everything sky rocketing and for anything other then microchips from the overstretched TSMC fabs the real cause of the price hikes is a breakdown in the fragile "just in time" logistics network, dependent on a few choke point running at 101% efficiency all of the time.

The headline should be that Europe as 0 storage capacity so people will pay to get rid of the natgas (someone else should store it).

This is a temporary problem and does not mean the natgas issues are solved for the winter.

There was a similar issue with oil storage in April 2020[1]

[1] https://www.nytimes.com/2020/04/20/business/oil-prices.html

Exactly, we are witnessing supply destruction. It's worth considering that liquid natural gas is one of the most expensive (in both emissions and cost) to ship.

It needs to be held in special LNG carrier ships that can keep it not only at the right pressure, but the right temperature (against vast fluctuations). The crew on this ship requires special training and the ships carry a different insurance profile.

This is not like oil which is essentially held at room temperature in a water tight vessel.

Therefore just having LNG in a ship takes a considerable number of resources even if it's just sitting there. Crew and insurance has to be paid, refrigeration and ship costs add up, as well as the opportunity cost.

As you can imagine, getting the LNG that you very expensively purchased in the US, shipped, and then brought to Europe, is quite important. Every day delayed this becomes money that is not just being incinerated, but also not being maid.

What we are witnessing now is supply destruction, and as much as the ignorant journalists at CNN may celebrate it, this is actually quite bad long-term for Europe.

Coincidentally, the only other thing that is likely to be more expensive to ship is what Canada's Trudeau has promised Germany it will send: hydrogen. Thankfully that is likely to never happen as the promise was as limp-wristed as it gets.

Crazy idea...

Let them refill ships like these https://en.wikipedia.org/wiki/CMA_CGM_Jacques_Saad%C3%A9 at sea! While https://en.wikipedia.org/wiki/Slow_steaming

Like aerial refueling for military aircrafts, where the tankers are circling back and forth along the traffic patterns in the air!

You have different markets essentially - there is a market for delivery, and a futures market.

The market for delivery briefly went price negative. This is dominated by what is in the pipeline right now and what volume of gas is being pulled from the pipeline right now.

The futures market is still positive. This market is served by LNG and gas that is still in the ground. The price here is dominated by risks.

---

The above model is oversimplified and wrong. If you want to know how things work, it may take some dedicated study beyond internet comments.

> The above model is oversimplified and wrong.

Can you share anything that would help us commoners reading internet comments understand why the analysis is wrong?

There are more than 2 markets. The dominating factors change based on market conditions.

However it would be equally false to believe that the only useful data point come from future market.

Every market that enable trade gambling is bound to be volatile and sometimes disconnected from reality. Gamblers that manage to to accurately estimate this delta are the winning one.

PS: Actually that's how you end up with negative price, a gambler acquired a huge quantity of gaz in the future market hoping to sell it even higher on the daily market. Nice weather daily market drop. He end up selling negative because he's just a gambler living in NYC and he don't have any usage for the gaz he own in a ship ready to deliver in the European northern sea. So he is ready to pay to get away of this deal and soon enough he is ready for his next sad gamble...

I try to explain this to people all the time with respect to gasoline prices in the US.

People thing it has to do with the 'oil companies', but crude producers are hedged into next decade for the most part. Even on the refinery side they are locked in long term contracts with distributors for their products, of which gasoline is a very small piece of the pie.

I listened to a Planet Money podcast [0] last month that was really interesting and helpful (for me at least) to understand the aggregate price breakdown and the different aspects which contribute to the sum (e.g. transport, refinement, drilling, taxes, etc ...) price for a unit of gasoline.

In particular, one portion talks about how tankers aren't beholden to the original manifest when they leave port A to go to port B. Mid voyage, they can suddenly pivot to port C if the spot buying price there is better than port B. And so on and so forth. So, until the tanker reaches a particular port - the market is what dictates which ports the tankers end up gravitating towards dynamically (and probably factoring in current and future weather, spot buying price fluctuations, current proximity, piracy, etc.) Really fascinating stuff and was eye opening for me to realize how truly small the transport cost portion is for the cost of a unit of gasoline.

"Planet Money investigates how exactly gas stations determine how much a gallon is going to cost us, and why those numbers are so volatile."

[0] https://www.npr.org/2022/09/15/1123108797/planet-money-break...

I really don't understand the doom and gloom wrt next year. What was obviously completely underestimated was the elasticity of consumer demand for gas. In Germany, consumers are using 25% less gas even if you account for the weather.

So with increased supply from Netherlands and Norway, even a limited amount of LNG will probably be enough to fill the storage again and compensate the missing Russian gas (which accounted for about 40% of the German gas supply.

We, too, have not switched on the gas based heating yet. Instead, we are using a mix of wood and infrared electrical heaters to keep the rooms at a bearable (albeit not overly comfortable) 19 degrees celsius.

I imagine you'd be using gas if you were paid to use it. Sadly market prices in the consumers favor seems to rarely make it to actual consumers.

At least in the Netherlands you can get a energy contract with dynamic pricing, where you pay the actual market price (plus tax) at time of use. When energy prices go negative, you'll also get paid.

However, this is a knife that cuts both ways: if the energy market prices rise sharply, you'll also immediately have to pay higher prices and don't benefit from the contracting ahead-of-time and averaging that regular energy companies do. I've spoken to people with such a contract whose energy bills went up by >100x this year, compared to last year.

Seems incredibly risky to take without any storage tanks!

The doom and gloom makes more sense when considering who benefits from pushing that narrative.

If by consumer you mean only residential households then yes I agree. But if you enjoy consuming the products of or enjoy the benefits from the many wonders of German industry and manufacturing then underestimate no more.

> We, too, have not switched on the gas based heating yet. Instead, we are using a mix of wood and infrared electrical heaters

In the event that your electric power is derived from gas, you've shifted the burden elsewhere and actually increased overall gas consumption, since using gas to warm your home directly would be more efficient.

Not if the electric heaters aren't producing the same amount of heat. The comment suggested they've reduced heat consumption.

Producing that amount of heat with gas would still be better than using electricity.

Depends on the generation method. If OP's using solar panels, it's a net positive. If their power is largely generated by nuclear or hydro, also a net positive.

If it's generated by fossil fuels, agreed.

Infrared heaters are just resistive heaters with reflectors to redirect the radiation to where it's needed. You can aim one at yourself while you're working to remain comfortable even when the rest of the room is cold. This can sometimes be cheaper than running a heat pump to heat the whole room.

In practice, electrical heating is is often spot heating in one room or even aimed directly at a person - a niche that isn't really served by indoor gas-fueled heating appliances.

If they were heating the same area, then they'd have probably replaced their furnace. Europeans have been buying record numbers of air to air heat pumps this year. Even with transmission and conversion losses, their coefficient of power is high enough to use less natural gas than directly burning it would.

You might think it's impossible to beat a modern 98% efficient gas furnace, but electric heat pumps can have effective efficiencies greater than 100%. (sometimes 200% or 300%!) They can do this because they "steal" heat energy from outside (yes, even in the cold winter air)

Yes, but if the electricity is made from gas, then 300% efficiency of heat pump is better than 98% efficient heat furnace only if generation efficiency is at least 33%.

Heat pumps are pretty great, but as of today, they are by no means necessarily more efficient than burning gas directly for heat, at least when it comes to GHG emissions. In fact, in very cold climates where air temperature is below freezing most of the time, air-source heat pumps are highly unlikely to be more efficient than just burning gas, unless we move wholesale to nuclear for electricity (solar won’t help you during winter, and wind is too fickle to solely depend on).

> only if generation efficiency is at least 33%.

the efficiency of a combined cycle gas generator is usually 50-60%.

Then it depends on what portion of the electricity mix is CCG instead of simple gas turbines or coal, what’s the actual efficiency of heat pump (you won’t get 300% when it’s subzero temperature) etc. Point is, air source heat pumps are really not much, or even necessarily at all more efficient than just burning gas directly at home, it all depends.

at >50% efficiency, the heat pump heat factor has to drop below 2. On a modern heat pump that's about -25C or so. I don't think it gets that cold in Germany.

Moving heat is always cheaper than creating it.

Also, gas furnaces get those 99+% efficiencies only at input=output (ie no heating) temperature. Most radiators require a water temperature well north of 50C to emit the power required, and for decades gas furnaces were thus set to default output temperatures of 70-80C. At that point, the maximum thermodynamic efficiency (which is a curve as function of temperature differential, with the optimum at Tdiff=0, ie no technical improvements are going to improve this) is more like 70-80%. Actually, a cheap way to get a ~10% gas bill reduction is to change the output temp to 50C (if yours runs at 70+) and see if your radiators still can emit enough heat to reach your desired room temperature.

Long term, heat pumps are the only sane choice. Burning gas in a plant and running a heat pump off its electricity is more efficient that burning it yourself. In fact, as of next year (or was is 2024?) any gas furnace must be replace with at minimum a hybrid heat pump here in the Netherlands.

With the current weather, most electricity during the day is generated by wind and solar. So, thats not that much of a concern.

> What was obviously completely underestimated was the elasticity of consumer demand for gas

I don't think it was evident that individuals and businesses would be willing to make some of these changes they have. For example, German companies are planning on shutting down factories for the winter. Cities are planning on ending night lighting.

In addition, winter so far has been fairly warm. It may still turn cold, so Europe isn't out of the woods yet.

Finally, the increase in the LNG supply was achieved incredibly fast. If someone had predicted Europe would have the LNG supply they do today at the beginning of the war they would have been dismissed as a utopist.

> In addition, winter so far has been fairly warm.

It's Autumn. Winter starts on the 21st Dec.

October in most of the Europe is not that much of a heating season, November will make us start digging into the gas we prepared. It's way too early for early to judge how easy it'll be.

That's true but I think the normal reaction is when it feels cold to turn up the heater and not waste a thought about getting wool blankets to sleep for instance. Also I never used indoor thermometers until very recently.

> Winter starts on the 21st Dec.

21 December is Midwinter Solstice...

By orbital mechanics, winter starts around 10 November.

Nope.

This year, astronomical winter begins on 21 December 2022 and ends on 20 March 2023.

Meteorological winter begins on 1 December.

https://www.metoffice.gov.uk/weather/learn-about/weather/sea...

Irish winter starts the day after Halloween https://en.wikipedia.org/wiki/Irish_calendar

      Now is the winter of our discontent
      Made glorious summer by this sun of York;
      And all the clouds that lour'd upon our house
      In the deep bosom of the ocean buried.[1]

[1] Shakespeare, William, Richard III, 1.1.1-4

> Winter starts on the 21st Dec.

Or on Nov 10, or on Dec 1 depending on how you count.

> If someone had predicted Europe would have the LNG supply they do today at the beginning of the war they would have been dismissed as a utopist.

Not really. It was always a matter of cost. Losing 30% of gas supply is no laughing matter - and the shock will naturally push governments to willingness to pay above premium prices to stabilize supply.

Europe can't just "pay above premium prices" to replace Russian gas. It would have been physically impossible to replace the Russian gas (and it still is physically impossible to fully replace Russian gas within 2022) without creating a tremendous amount of infrastructure around getting LNG, which European countries have been incredibly successful at doing so.

The progress they've made in creating that infrastructure is beyond what basically anyone would have predicted at the start of the war.

Replacing gas also means taking it from someone else and, hence, disturbing poor countries.

I think you’re basically right, but just noting that winter hasn’t started yet and climate change has blessed Europe with an unseasonably warm October.

> a bearable (albeit not overly comfortable) 19 degrees celsius

Interesting to see what temp other people keep their homes at. Our normal indoor temp is 19 and I sometimes find that too warm.

I like mine at 23-24 in the winter, although the 'default' in the US is usually 20-22

Temperature isn't the full story, what you really want is the combination of temperature and humidity, i.e. the heat index.

Temperature pretty much is the full story indoors. If you live in an area with 80%+ humidity outdoors, you make sure that isn't true indoors.

I would generally want 21 or 22.

It's the same with electricity markets: at times there's so much wind and nuclear power that the spot price goes below zero in Europe as well as in the US: https://www.sciencedirect.com/science/article/pii/S266679242...

I still pay around 5 cents/kWh to the middlemen though so consumption hasn't been profitable to me so far.

Where are you based if you are paying five cents? Here in Germany, I pay 10 times that much.

The cost for the electricity net was around 7.5 cents in Germany last year: https://www.bmwk.de/Redaktion/DE/Artikel/Energie/strompreise...

I paid only slightly more than that in Québec, Canada. The province is blessed with a superabundance of hydroelectric potential and thankfully the infrastructure is in well-managed government hands.

In Helsinki, Finland, we pay 4 cents/kWh to the local grid company. Then on top of that, everyone has a contract with an electricity supplier of their choosing, and mine charges 0.9 ¢/kWh on top of the hourly spot price. (My previous supplier charged a fixed price and went bankrupt due to the current crisis.)

The spot price in Finland is somewhat linked to the prices of the neighbouring Sweden, Norway and Estonia. Recently, it has varied with -0.1 and 93 ¢/kWh as the extremes and the average around 15 ¢/kWh (night-time lows included).

So can I run a line to your house, please?

It might be more practical to invest in solar and wind. I hear solar can be profitable even here in the north.

Unfortunately not in winter though, I think.

Apparently and surprisingly, the biggest issue is not the darkness but cleaning the panels from frost and after snowfall. On the positive side, subzero temperatures increase the photovoltaic efficiency, white snow increases the amount of light hitting the panels, and the demand is highest during the cold, calm and sunny winter weather type. https://www.oulu.fi/en/blogs/science-arctic-attitude/potenti...

Very interesting. Thank you.

> at times there's so much wind and nuclear power

Isn't the amount of nuclear power constant?

Yes and no: yes in the sense that they can't quickly power down when wind would suffice, no in the sense that they suffer both regular and unplanned shutdowns with an average load factor of 80%.

Yes, but demand isn't. And nuclear can't be trivially shut down, the reactor stays hot for quite a while and that energy needs to go somewhere (which is the whole point of the iconic giant cooling towers these plants have). So if demand drops rapidly and your reactors are going full tilt, the price of electricity goes to zero.

More importantly: xenon poisoning.

I am an American and not knowledgeable about how energy pricing works, so I am curious, how do we square this with the rates that Europeans have been paying for energy and natural gas lately? Are utilities making off like bandits? Or were they running very low over the last few months and suddenly got a huge influx?

Well lately the price is <100EUR/MWh, peak this year was >350EUR/MWh

Yes, on the one hand there are some sticky prices and higher profit margins (which is talked about) but also increased volatility in general. Beyond that, I wish I understood it better.

Very short term and local supply and demand issue where there was way more supply than demand. A market inefficiency issue with Europe finding new sources for natural gas supply and being paranoid about running out.

They’re trying to cut off Russian supply and being threatened of being cut off. Russian supply is being replaced with American gas. But this is new, it was warm, there was too much gas in places. It happens. It’s good news really.

> how do we square this with the rates that Europeans have been paying for energy and natural gas lately?

Different markets. The price that went negative was for immediate delivery of gas (spot market), while utilities buy their energy way before it's actually delivered (futures market). The price on the spot market went briefly negative because it's unseasonably warm in Europe right now (so less gas usage for heating), and all the storage is nearly full. The price on the futures market is still high, because once it gets cold demand will pick way up and outpace supply.

An interesting sidenote is that storage being full significantly increases volatility in the market: in the usual situation, a storage facility would buy up all the surplus gas on the spot market at a cheap but probably non-negative price, store it, and sell it on the futures market for a higher price. This stabilizes the market, and creates some constraints on market prices. Now that storage is full, they can't do that, and prices can fluctuate much more.

Spot electricity prices have been low in Scandinavia, too, so the markets are, at least weakly, linked.

I had to pay 800 euros last month for home energy on my variable contract in Amsterdam. Insane.

Well, if you have a refrigerated pressure tank which can store a few tens of thousands of cubic yards of LNG, you are in luck.

What are the kWh prices in Amsterdam? I'm in London and would need to consume more than 1,700 kw to pay that much (£0.3866 per kWh, £0.3849 standing charge).

Edit: I'm also on a variable contract

How variable -- how many times a day does your price per kwh change?

It doesn't change during they day, it only changes when the government approves price increases. I guess variable means a different thing in the UK. Do you have peak and off-peak prices?

That's not how it works in the Netherlands

That's why I asked. Thank you for your detailed explanation.

Before the last 12 months, Octopus had an agile price where the price you pay the rate depending on different time of the day. Sometimes this would be high (25p+), sometimes it would only be a couple of pence. Sometimes it was negative.

https://agileprices.co.uk/ shows the price for a given region. For example back on October 1st you'd actually be paid to charge your battery --

Because of the government's meddling in the market it's no longer available for new customers, so if you have the resources or ability to smooth your load, it's meaningless, you can simply claim your massive subsidy from the government and recharge your 80kWh car battery at peak time for 35p // £28, with the taxpayer picking up the extra £52.

But in a free market you'd charge at low demand times (say overnight when you could have been paying 10p/unit) and either use it, or possibly sell it back, at high peak times (that 80p/unit)

(I'm not sure how feed in tarrifs worked with Octopus, but a system which would reduce the load on the grid has been scuppered by the government with the inexplicable energy policy)

That's quite interesting. Prices seem quite cheap compared to what I'm paying right now. Too bad they are not taking new customers.

I'm not from Holland but in EU and I pay hourly market rate of my regions electricity pool.

So your prices are constantly changing? How much do you pay on average for a kW?

Yup, around 15c/kwh, spot prices are common over EU in some countries more than others.

They need to perfect the capture and storage technology and force all the Bakken oil field flares to use it.

Billion of cubic feet every DAY just burnt off into the atmosphere because the oil makes them more money. Over $100 Million per MONTH

Our country/world is insane with waste while people freeze and starve.

Why can't things just be free? Free stuff for everyone everywhere! Yeah! I'd vote for anybody offering me free stuff, even if it came with strings that I wasn't aware of until it was too late. If only Hugo Chavez were alive today. He'd know what to do. Sadly, the only playbook all our leaders have to go on are his books.

Rather, so few places to store natural gas for ordinary use. Don’t trust journalists to be not dumb.

This is a better situation than the reverse. It’s fortunate the winter has been mild so far. Will be interesting if the LNG industry can keep pace and replace Russia for good.

Not to nitpick and assuming you're living in the northern hemisphere, winter has not officially arrived; we're still in the fall/autumn season.

In fact It’s unseasonably hot currently. Nobody is using heaters at all I suspect.

Where do you live?

The south of Spain.

Yeah, sorry.

Same here, northern Germany, it has been unusual warm, we haven't started to heat this year yet because of it

(though I might not be impacted as hard later also as the city is producing biogas and is using PtH).

Strikingly warm in Sweden as well. Geothermal heat pump does work a few hours per day, anyway. It drops far below 10 degrees celsius at night and my house is not modern enough to manage comfortable temperature with only waste energy as source.

Yes we're lucky to live in a modern house.

Chiming in from Poland. There have been a few cold nights in the last week or two, but otherwise it's autumn-level warm. Today in particular was unexpectedly warm, early summer levels.

Same in Berlin

Slovakia, we didn't start heating yet, a few years ago that would be unthinkable. Looking at the forecast, we won't be heating for at least another 10 days.

Which is good, isn't it?

At least the energy crisis has been averted for the first month of the autumn season in Europe and the outlook looks promising going into the second month esp for households in light of rising costs and soaring inflation.

Good right now in the energy crisis, not so good long-term when higher temperatures won't be matched by more rain, which they probably won't, and we will slowly turn into a savannah.

It's a little too nitpicky IMO to point this out (not to say you were trying to be though, all good), because what people are shorthanding here is that it's "unseasonably warm" still, and that's a good thing.

"Winter so far has been mild" is not a confusion on their part that it won't get any colder, just a misstatement. Autumn has been unseasonably warm, and the difference in parts of Europe between the two isn't as severe as here in the US.

I like how you're effectively nitpicking my seemingly nitpicking comment in defense of anti-nitpicking :)

It's nitpicks all the way down! :D

>LNG industry can keep pace and replace Russia for good.

Nobody can replace Russia and their resources in the long-term.

“long term” is doing a lot of work in that sentence.

It seems clear that what we’re doing right now can sustain things until spring. If we’re willing to pay to do it again next year, and the year after that… at some point it’s going to be financially viable to change the makeup of both energy sources and how it’s consumed.

>at some point it’s going to be financially viable to change the makeup of both energy sources and how it’s consumed

Last spring - which is why heat pumps became very popular in Europe over summer. Things will change even more in the future, though I'm not sure how much.

North American petroleum and developing solar and nuclear resources probably can.

Nobody should replace Russia in the long term as fossil fuels should go away completely.

Russia is being replaced by solar, wind, hydro, geothermal, and nuclear power in the long term. Being a fossil fuel exporter is not a sustainable business model in the 21st century.

The thermal power available from all Russian gas is about 5 years of chinese PV module production or 10 years of world wind additions at the current (rapidly increasing) rate. We can tighten the belt by 15% while building out enough capacity to replace it entirely.

Once cheap hydrolysers scale production, a huge chunk of the market will start to disappear due to ammonia production switching over.

It can for Europe, prices will be higher than with Russian gas, and production cost will rise.

But the main impact will be to poorer countries which until now might have been depending on LNG while "rich" Europe is buying up everything.

4 seasons in 12 months = 3 months per season. March is not winter, it's the start of spring.

March, April, May = Spring

June, July, August = Summer

September, October, November = Autumn/Fall

December, January, February = Winter

No Winter has started this year yet, we have one more month of Autumn/Fall.

> March is not winter, it's the start of spring.

That depends on which definition you're using. The astronomical winter runs until 21 March (and doesn't start until 22 December). Seasons in general are just a somewhat ill-defined concept, as weather doesn't particularly care about human constructs.

Can anyone ELI5 on to why are we paying so much for it then?

Copying my answer from another comment:

The spot price is about supply and demand over an extremely short time period and has dipped below zero because at the moment gas storage in europe is very full, so if you've got a load of natural gas to sell no one is buying because there's nowhere to put it. This is probably related to unseasonably warm temperatures in Europe at the moment, so people are using less gas than expected to heat their homes.

The high prices you pay as a homeowner are to do with high expected demand over to winter relative to the available supply, because the supply has been seriously reduced due to the war in Ukraine.

Also, gas providers filled up storage and secured volumes at high prices. Even if they now buy for way less, customer prices will be an average (at least, depending on exactly how providers calculate costs and thus prices) of those two. So until the old inventory is consumed, consumer gas prices won't move a lot.

Overall, this is good. As a consumer you want stable prices and not depend on spot and future markets fluctuations.

This is a classic market shock panic buying. Something newsworthy happens that will reduce the availability of some commodity rising prices slightly, the reaction is that people start trying to stockpile the commodity which further stresses the market and drives prices even higher, fueling more fears about shortages, and so on. Then the storage fills up and it wasn't really that big of a shortage in the first place so the demand utterly collapses.

It's the same thing that happened to toilet paper back in early 2020.

I only hope this accelerates the transition to renewable energy sources in Europe.

Can I take a stab?

If I just so happen to have decent storage capacity for this gas I could make a killing, except if I did have that storage, I would have already had long term contracts to fill that storage/keep it full given the uncertainty in Ukraine so there's not really any place for this gas to go, but they're still producing the gas and it's hard to just stop doing that so for a little bit the gas companies were willing to pay people to get this gas off their hands to make room for the new gas they were pumping out.

Right?

Almost. If you had long term storage you would be following the market yourself. There is a good chance that you are the one who paid for this gas months ago when it left port, expecting to sell the gas you currently have in storage and refill it with shipments arriving today. So odds are you lost money today.

Note that the above was a good and reasonable bet to make. You should have already known the risk that this would happen and so are not surprised. You still expect to make money of the year, just not as much.

Okay, that makes sense.

Do people in these situations try to come up with on-demand storage at all, or is that not reasonable given the difficulty of storing natural gas?

Like, could you try and load up your idle fleet of containers (truck, ship) on the cheap or are we past that now, hence the negative price?

Any reasonably-sized storage has already been contracted out in advance, and improvising additional storage capacity isn't really viable given the amounts of gas we're talking about and the environmental laws storage has to comply with.

However, what has happened in the past for oil is tanker ships anchoring with a full load just offshore until they can sell the load for a good price. I don't know whether that's also feasible for LNG though, given the boiloff concerns.

Yeah that's what I was thinking, but also using trucks that are for short-term transport as longer term storage could be possible to make a quick buck, but I bet anyone that can do that is doing that heh (or can't if it's not feasible technically).

> Natural gas prices just dipped below zero.

> Those ships [are] carrying about $2 billion worth of LNG.

Really?

The local spot prices dropped below zero. The price of gold might be 1000 currency units an ounce, but if my house is about to collapse under the weight of all my gold I might pay you a little to take it off my hands - dropping the price below zero for the people in my immediate vicinity.

Depends on where those ships can offload the LNG. If they were in Asia or the US Northeast, prices would not be negative. (But prices differ by significant multiples between those locations)

The $2 Bln quote could be historical but in real time live spot prices at the present, the rates cratered momentarily to zero or even negative territories.

Luckily, LNG ships can simply be parked at sea until prices rise again, same for oil tankers. Pipelines going into almost full storage don't have that luxury.

It costs money every day to leave the ships parked and idle, but in some ways it is a good thing. Those ships are basically extra storage in the event of a long cold winter that stresses the natural gas supply harder than expected. They offer flexibility to deal with pipeline shortages.

The costs of having those tankers parked is orders of magnitude less then the value of their cargo and potential profits.

Spot prices can be very volatile and easily drop below zero. If your stores are full and you have nowhere to put gas that might be building up inside an incoming pipeline, you'll be happy to give it away for free. But once it gets cold and people start using more gas, you might pay those $2B for the gas in the tankers off your coast to satisfy increased demand.

Different countries have very different storage capacities. Some nations have most of their years demand in storage capacity whereas others like the UK have only a few days and require a constant flow.

If you are one of the countries that can store a whole year this is great news. If you're Britain, you could still be out of gas and paying exorbitant prices a week from now

Heh, how's Brexit working out for them? BTW has Nigel Farage paid for his lies?

Not to dismiss this entirely, but I can't recall political leaders at that level ever 'paying' for lies or misinformation in any capacity commensurate with the negative impact of the lies. Has his reputation been dinged a bit in some quarters? Perhaps. That'll be the extent of it.

This really isn't a brexit story

Textbook clickbait article, though I don't expect (nor want) the title to be changed or the link to be removed because it shows how desperate CNN is for coming back into the mainstream.

The prices are not "zero" or "below zero". Maybe for the companies that buy gas in order to resell it to the average consumer, but the normal consumer does not get it for free or gets paid to burn gas randomly.This is what a layman understands when s/he reads the title, which is factually incorrect as per others have already explained in this thread.

On another note, I'm even skeptical to believe the gas storage across Europe is full. Because if that was the case, the prices should have began to plateau sooner up until now, instead of staying the same/relatively decreasing.

There have also been a lot of new interconnect pipes installed in the recent years. Basically all the way from Norway-Scotland-England-France-Poland-Lithuania-Latvia-Estonia-Finland it's part of the same network, although I'm sure there are bottlenecks.

Here's a recent new pipeline part: https://en.wikipedia.org/wiki/Gas_Interconnection_Poland%E2%...

Sprinkle some LNG terminals which have and are coming also online, and it becomes much more resilient.

There's a lot of this diligent infrastructure work going behind the scenes, away from the political drama.

Spot prices are just that spot prices. Just like oil prices dropped below zero for short period during shutdown. Now this happened with gas. Doesn't necessarily tell too much for next months.

The oil prices that went negative were actually futures, not spot prices.

Are we buying 0 gas from Russia so we can stop funding their war machine? Imho a total ban of imports is needed.

Completely unrelated, but I'm truly impressed that CNN offers a light version of their articles without any layout. This is really refreshing and a pleasure to read. I would like to see more websites do this and focus on the content.

cnn.com pretty much went down during 9/11 and I assume they tried to put in countermeasures after that, but who knows how well it would work after over two decades.

This is not entirely related to the article:

Rising temperatures should reduce demand for fossil fuels as a heating source (I think). Does anyone know if this is already factored into global warming predictions?

I don't know but just so you know, it can also make it a lot worse by cutting off the gulf stream which is how we're not spending even more energy in (especially northern) Europe.

It will also raise demand for whatever runs air conditioners. This is all factored in.

What isn't factored in (guesses are, but we have no idea to know what guesses are right) is how much will we become more efficient, or how fast we will switch to renewables. This year heat pumps were very popular to install in Europe this summer, and they are more efficient, so all models need to be updated. Predictions that are more than a few years out are all being updated for expected growth in EVs, solar, and wind - all of which are growing (probably in expected range or your predictions so far, but all above the expected values)

Also, the climate helps.

We have 25C in Bilbao. >30C expected at the weekend.

We usually get UK weather on Fall, and it didn't rain in weeks...

No chilly-windy Winters, but the "alternative" we are living on looks far worse.

I'd be interested in how storage capacity has changed over the past 5 or so years. Has it been reduced for some reason?

then why are we still paying so much for it?

I think the article is misleading. The spot price is about supply and demand over an extremely short time period and has dipped below zero because at the moment gas storage in europe is very full, so if you've got a load of natural gas to sell no one is buying because there's nowhere to put it. This is probably related to unseasonably warm temperatures in Europe at the moment, so people are using less gas than expected to heat their homes.

The high prices you pay as a homeowner are to do with high expected demand over to winter relative to the available supply, because the supply has been seriously reduced due to the war in Ukraine.

Because most Europeans do not need all that gas today or tomorrow, and storage costs money.

What's wrong with storing it on a ship? Anchor it and pay a skeleton crew to keep it operational.

I cannot imagine a happier person right now than the owner of a LNG tanker. Sure, using it as a dumb storage is a good business, but it's sure a better business to move the ship around to do arbitrage between gas markets with crazily different prices.

That you cannot conjure a gas tanker ship -and the required infrastructure- out of thin air.

They arrived full of gas with nowhere to offload. Those ships are what I'm suggesting wait until offloading is possible.

Gas is also transported by other means. I imagine those ships are not selling their load at negative spot price. What is “wrong” with waiting is that you’re losing money instead of being making money.

Those ships most likely sold their load of gas before they even set sail.

Nothing wrong with that, except the day $100-200k/day you’re paying for charter…

I think Germans can afford it and are willing to pay it to keep their economy going

If there were empty ships that could be filled, then clearly prices wouldn't have gone negative. Surely that reservoir is filled already (or the ships are empty and enroute to gas terminals, and thus already accounted for, etc...)

It will vaporize, I don't know how much

Noone told my gas company which is still demanding about 10 times the normal price.

Any link to the price charts?

well, they haven’t turned my building’s heating on yet.

Sorry what? The price of gas has multiplied by 15 here...

> Europe now has so much natural gas that prices just dipped below zero

Is canabis legal in US ?

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