Norwegian energy giant Equinor needs at least €1.5 trillion to cover the costs of European energy companies exposed to high gas prices, which does not include UK companies.
Eval countries have provided billions of euros to help electricity suppliers displaced by additional collateral payments on transactions, known as margin calls, but Equinor estimates that such support is only a fraction of the total bill.
The mismatch between the language of margin calls and the apparent profitability of energy utilities and the significant short-term cash flow pressures inevitably led to the so-called credit crunch in the banking sector of 2008, Lehman Brothers’ Bankruptcies, and bailouts of other financial institutions come to mind. Bank.
Utilities often sell electricity in advance to secure a certain price, but before delivering electricity they must maintain a “minimum margin” in case of default.
This is competing higher, largely because Russia has cut gas supplies to Europe, which has led to higher energy prices and businesses struggling to find cash.
Helge Haugane, senior vice president of gas and power at Equinor, told Reuters that the total value of such margin calls in Europe outside the UK is likely to exceed €1.5 trillion, squeezing market liquidity. , said many small businesses are struggling. .
“It’s a function of price and it’s going up,” Hoganeh said, adding that this also requires government intervention.
As a bystander at the International Gas Conference in Milan said, “People just don’t have enough liquidity, so the market could work a lot better than it does now.
Gas prices, which surged to five times their level a year ago following Russia’s invasion of Ukraine, rose further on Monday after further Western sanctions forced Moscow to indefinitely shut down its main Nord Stream 1 gas pipeline. jumped up.
Haugane said he believed that if Russia cuts off all gas supplies, massive demand cuts would be the only viable short-term solution to Europe’s power crisis.
He also said the European Union’s proposal to impose price caps on imported gas and gas used for power generation would not solve the continent’s underlying problems.
“If Russian sales were to stop completely, the decline in demand would have to be even greater than we’ve experienced before, and price caps and stuff like that can’t solve the underlying problem,” Hagane said. says.
At a meeting on Friday, EU ministers discussed a number of options, including a price cap on imported gas, a price cap on gas used to generate electricity, or temporarily removing gas power plants from the current EU system of setting electricity prices. We are going to discuss.
Price cap proponents say some derivatives trading is blocked to avoid margin calls, but Hagane was skeptical.
Reducing demand is “a very difficult political task for those who can do something about it….but there is no other solution in the short term”.
In July, the EU called on its 27 member states to voluntarily cut gas demand by 15% this winter. However, the government has been slow to reduce consumption.