The wholesale price of gas has risen to its highest level in more than a year after Russian supplies stopped flowing to rest of Europe via Ukraine at the end of December 2024. Benchmark prices rose on Thursday to the highest level since October 2023, a day after a longstanding transit contract between Russia and Ukraine expired. The price of gas for February delivery rose as much as 4.3% on Thursday, before easing back to 1.9% higher at €49.83 a megawatt hour, IPN reports, with reference to The Guardian.
Traders had been expecting the loss of Russian gas, with no alternative in place, and were closely monitoring whether it would lead to quicker withdrawals from storage facilities. Analysts at Deutsche Bank said that it’s worth bearing in mind that prices are still well beneath their levels seen throughout the entirety of 2022. But European gas storage ended 2024 at its lowest year-end level in three years, and the recent increase in prices is set to add further to inflationary pressures.
The end of the supply of gas immediately resulted in power cuts for hundreds of thousands of people in Moldova’s breakaway Transnistrian region. The measure was taken by the local energy company Tirasteploenergo, which announced that it cannot supply heat due to the interruption in gas supplies. According to an employee of the company, it is not clear how long the situation will last and the residents were urged to dress warmly and use electric heaters. Some facilities, such as hospitals, continue to be supplied with gas and local authorities forbade the use of gas or electric stoves to heat the apartments, warning about the risk of tragedies.
Slovakia reacted to the end of gas transit through Ukraine with a series of statements made by Prime Minister Robert Fico. He announced that the Slovak government will consider reciprocal measures against Ukraine, including cutting off electricity supplies to Ukraine, reducing aid for Ukrainian refugees and requesting the resumption of gas transit or compensation for the losses suffered by Slovakia due to the interruption in gas supplies.
"The only alternative for a sovereign Slovakia is to resume transit or request compensation mechanisms to replace the loss of public finances of almost €500 million," Fico said.
The Slovak official added that his party was ready to discuss these measures with the ruling coalition and that he would raise the issue in Brussels at a meeting scheduled for next Tuesday. Fico pointed out that although Slovakia has alternative sources of gas, the loss of transit revenue and the additional costs of importing gas from other sources will lead to higher electricity and gas prices in Europe.
In a post on social media, Ukraine’s president, Volodymyr Zelenskyy, described the end of the transit deal as “one of Moscow’s biggest defeats”. Ukraine’s energy minister, German Galushchenko, described the cutting off of the transit route as “historic”. He said it would force countries across Europe to wean themselves off Russian gas supplies.
This change in gas flows, amid the ongoing conflict between Russia and Ukraine, is expected to have significant economic implications for Europe, affecting prices and the stability of energy supplies in the region, said The Guardian.
