Medvedev threatens Europe with shocking gas price
To the heads of state and government of the European Union countries. In connection with the increase of gas prices to 3,500 euros per one thousand cubic meters, I’m forced to increase the price forecast to 5,000 euros by the end of 2022. With warm regards,
Medvedev said on Telegram.
"European spot gas prices have reached $2,500 (per 1,000 cubic metres). According to conservative estimates, if such a tendency persists, prices will exceed $4,000 per 1,000 cubic metres this winter," Russian state gas company Gazprom said two weeks ago, as its own export and production continued to fall amid Western sanctions.
Medvedev's updated forecast could put even greater pressure on the Hungary's new utility bills reduction rules, if these spot market prices also affect the cost of Hungarian state gas procurement.
A gas price of €5,000 would mean a price of around €480/MWh on the exchange, while last Friday the September forward gas price closed at around €320, so this would mean a further 50% increase, which would put further devaluation pressure on the forint, which would indicate an even higher gas price in forint terms.
To give an example, a gas price of around 480 euro/MWh at an exchange rate of EUR/HUF 430 would translate into a gas price of around HUF 2,100 per cubic metre, while Hungarian households are to pay HUF 732.4 for every cubic metre of gas used above average in August and September and HUF 752.5 in October, November, and December as the residential "market" gas price.
The long-term Russian-Hungarian gas purchase contract concluded last year closely tracks the Dutch TTF gas exchange prices, based on the facts so far, although it is not known whether the additional 700 million cubic metres of purchases currently under negotiation will be fixed-price or whether they will be aligned with the TTF. In any case, the message of the Russian senior executive strongly questions the sustainability of Hungary's revised overheads reduction scheme.
Cover photo: Getty Images
