The head of commodity and derivatives research at Bank of America Francisco Blanch stated that European leaders should limit natural gas prices as the significant spike in interconnected electricity costs is harming the industry, reports Business Insider.
One of the consequences of the Russian invasion of Ukraine for Europe was a spike in natural gas prices by 1000 percent compared to 2021. The European Commission is currently trying to find a way to limit energy prices, as well as explore measures to reduce demand, Reuters reported yesterday.
– Transitioning to 100 euros per megawatt hour: most European industries cannot operate, can they? So, when you are at 1000 euros per megawatt hour, you are crossing the point of demand destruction – said Blanch.
He also mentioned that the significant increase indicates 'clear market failure' that should motivate the authorities to act.
Reference electricity prices this week exceeded 1000 euros per megawatt hour for the first time. The reason for this is Russia’s reduction of gas supplies to Europe after Moscow was hit by sanctions, while the European Union has committed to reducing its dependence on Russian energy sources.
– I believe that in the next six months, the consequences of not addressing the current gas shortage in Europe could be devastating for both consumers and industry – said Blanch.
Blanch also stated that such prices are likely destroying 'about five percent of European demand for gas and electricity every month'.
