Gas prices, where are we?

It is common knowledge that gas prices in Europe have literally exploded over the past year. Imports of natural gas became more expensive, which, of course, was reflected in prices. While it is clear.

Many people who heat and cook with gas have wanted to know if the price increase really includes “only” an increase in purchase costs. That’s why in 2022 I did a market observation that looked at price and cost changes for about 100 Swiss gas suppliers.

According to my survey, gas prices in Switzerland rose by an average of about 7 centimes/kWh from January to autumn 2022. However, the price increase varies depending on the utility company. Why? Currently, most gas suppliers purchase “their” gas through regional companies in international markets, each of which has its own procurement strategy. In addition to long-term purchase contracts, you can buy gas in the so-called spot market at current daily conditions, as well as buy “on security” at pre-agreed prices and dates. It is important to weigh the opportunities and risks of different procurement options. Thus, purchase costs vary depending on how the gas supplier himself buys.

The troubling question was, is the price increase really based solely on increased spending on purchases, or is someone making a dollar out of it?

I can reassure you: my analysis showed that the increase in prices in the first half of 2022 was largely due to an increase in procurement costs. They, in turn, are a consequence of the increase in European gas prices. However, Swiss prices changed with varying delays in relation to international events. In turn, purchasing strategies, the number of price adjustments per year, and the provider’s pricing policy play a role here. This explains why prices in city A went up a few months ago, but in city B only at the beginning of the year. In the electricity market, everything is different: here the price can only be adjusted once a year. How does it come from here?

At the end of 2022, natural gas prices in Europe fell sharply. However, they are still well above the level that was usual before the summer of 2021. Individual utilities have already cut prices. In other cases, the planned price increase was not implemented.

I expect and see to it that the utilities cut their prices again as quickly as they have raised prices in recent months due to increased purchasing costs. The dynamics of gas prices will remain in the center of my attention. I have posted a comparison of gas prices across Switzerland on my website, which I update regularly.

Source: Blick