Europe now has so much natural gas that prices just dipped below zero • Hacker News Board

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

#71

Post by jacobolus » Thu, Oct 27, 2022, 5:42 PM UTC

speedylight wrote: post #60

jefftk wrote: post #5

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…

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.

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

#72

Post by legulere » Thu, Oct 27, 2022, 5:45 PM UTC

leobg wrote: post #62

tuukkah wrote: post #54

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...

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

#73

Post by jefftk » Thu, Oct 27, 2022, 5:46 PM UTC

sorokod wrote: post #58

jefftk wrote: post #5

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…

>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.

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.

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

#74

Post by mrob » Thu, Oct 27, 2022, 5:46 PM UTC

bo0tzz wrote: post #65

xapata wrote: post #52

Earlier quoted context omitted.

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.

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.

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

#75

Post by chinchilla2020 » Thu, Oct 27, 2022, 5:46 PM UTC

csours wrote: post #12

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…

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.

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

#76

Post by michpoch » Thu, Oct 27, 2022, 5:47 PM UTC

asdajksah2123 wrote: post #55

dr_faustus wrote: post #31

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 account…

> 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…

> 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.

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

#77

Post by Dylan16807 » Thu, Oct 27, 2022, 5:47 PM UTC

sorokod wrote: post #58

jefftk wrote: post #5

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…

>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.

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.

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

#78

Post by tesseract » Thu, Oct 27, 2022, 5:53 PM UTC

bo0tzz wrote: post #65

xapata wrote: post #52

Earlier quoted context omitted.

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.

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.

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

#79

Post by loufe » Thu, Oct 27, 2022, 5:53 PM UTC

leobg wrote: post #62

tuukkah wrote: post #54

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.

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.

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

#80

Post by matai_kolila » Thu, Oct 27, 2022, 5:54 PM UTC

remus wrote: post #40

qeomash wrote: post #35

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 e…

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?