GEO 114 and its Implementing Rules issued by ANRE brought the price on the Romanian gas market to historical highs, without any benefit for the population of Romania, led to importing significant gas quantities, at prices above the market price, but more importantly, it will have negative effects in the following summer and even the following winter. The liberalization of the natural gas market in 2016, after a rise in gas prices, has a tendency to stabilize the price of gas, which varies slightly depending on market forces. Following the request received from consumers regarding the price trends in the next period, the Intelligent Energy Association has tried to make some price forecasts for the next year, in an optimistic scenario.

Price of gas intended for the population (gas as commodity)

In the following chart we illustrated with burgundy the trends of gas prices for the population. It registered a decrease of 30%, after the cap of the price of gas from domestic production intended for the population, starting with May 2019. This price decrease was not reflected in the decrease by 30% of the gas price at the population, in fact the consumers not benefiting from GEO 114. The draft for the elimination of GEO 114 of September 2019 provided that as of April 1, 2020 half of gas intended for the population would no longer be capped to a price of RON 68/MWh. Thus, we consider that the price of gas for the population on April 1, 2020, will not reach the level at which it was when the price was capped, that price, in our opinion will be reached after the total elimination of the price capped on April 1, 2021.

Free price of gas on the non-household market

In the presented chart, it can be observed that starting with May 2019, the date of application of GEO 114 and of the cap on the price of gas from domestic production intended for the population, the gas price for the non-household customers has increased (green curve on the chart), the suppliers wishing to- and compensate for the losses caused by the price cap for some of the gas produced. In the assumption of a gas surplus on the market in the summer of 2020, due to gas quantities remaining in storage this year, as well as smaller gas quantities to be directed by ANRE (following the change of the gas quantity for the population with capped price), and following a potential gas surplus on the European markets, gas prices should drop in the summer of 2020, probably to a level similar to that of gas prices on the European markets this year.

Weighted average price of gas

In the above chart you the weighted average price of gas on the Romanian gas market is illustrated with blue for both before GEO 114 and after the apparition of its implementing rules.

It can be noticed that GEO 114:

• has brought against the background of the cap on the price of gas from domestic production intended for the population, but especially of the deficit determined mainly by ANRE Decisions to direct the quantities of gas from the domestic production, a high price of the gas freely traded on the market in 2019
• has determined an average price in 2019 above the average price of 2018
• will determine a great volatility of the weighted average price of gas in the summer and winter of 2020

Weighted average price of gas assuming the absence of the disrupting items in the functioning of the gas market

The Intelligent Energy Association has created a scenario in which it eliminated the disrupting actions in the Romanian gas market such as those in the autumn of 2017, the apparition of GEO 114, ANRE rules for the implementation of GEO 114, the implementing rules of GEO 64 issued by ANRE (although their deadline was November 2016) and reached the conclusion that:

• all consumers have been affected, directly or indirectly
• backward steps have been taken on the gas market:
  • at the level of behavior of the end-consumer, who does not trust in the attempt to negotiate its contracts anymore;
  • at the level of suppliers, giving up a creative behavior in relation to the offers made available on the market and resuming or borrowing the practices before the apparition of GEO 64/2016 – unofficial agreements on price and offers on the market.
• the price of gas in the summer of 2020, after the elimination of the partial cap on the price of gas from domestic production for the population, will be close to the one given by the market in absence of GEO 114 (IEA scenario on price evolution in absence of GEO 114)
• probably in the winter of 2020/2021 we will face a new deficit and we can expect new increases in gas prices;
• the price of gas in the winter of 2020/2021, after the elimination of the cap on the price of gas from domestic production for the population, will be higher than the one given by the market in absence of GEO 114 (IEA scenario on price evolution in absence of GEO 114)
• the beneficiaries were certain suppliers in the market and certain importers.
• the gas market has lost the chance of evolving to a more mature market and it will take a long time to repair this damage.

Translation from Romanian by Romaniascout.