All of us would complain how our government in its crooked ways made sure that Malta’s households will pay through their nose for years to come for natural gas, priced at what seemed like three times market rates for a generation. As it looks, with a natural gas crisis in Europe and globally intensifying, we all in Malta may end up paying less this winter that anyone else.

If nothing shady comes our way, that is. For Azerbaijan to stick to its well-pampered commitment, we would need to know the small print of a contract which in many ways was structured by good, old corruption – in the case of Electrogas with kaleidoscopic diversity. So fingers crossed that we won’t end up like Great Britain, already set for a cold, frugal Christmas.

The picture in the UK, grimmer than anywhere else in Europe for the moment, is nevertheless exemplary for a dire situation, caused by multiple factors.

Gas prices have globally risen sharply this year, 300 per cent in case of the UK, and storage tanks all over Europe remain depleted since last winter’s prolonged cold period. In many ways, it shows the dangers of a purely market-based approach, with little regard to energy security. In the UK, natural gas is not only used to heat households, but, like Malta, to generate a large portion of its electricity.

To protect households, thus double-dependent on gas and exposed to oligopolistic abuse, the UK has tried since 2016 to stimulate price competition by allowing start-ups to compete with the large incumbents like BG, Eon or EDF. These behemoths were accused of milking consumers by charging higher prices when the spot markets went up while giving back very little when wholesale prices dropped.

The new entrants were quickly gaining market share by offering cheaper gas when times were good. To make sure that they were not accumulating customers by a ‘loss leader’ strategy to raise prices later, market regulator Ofgem dictated firm price caps.

With wholesale prices now far exceeding capped consumer contracts, these small ‘disrupter’ companies die like mayflies. Yet another government intervention is under way to save the consumer from the dysfunction the government has created itself: the once vilified majors are asked cap in hand to please provide for all those millions of misled, unprofitable customers, offering taxpayers’ money and tariff leniency.

Greece, France and Italy, their consumers suffering unregulated, hence inhumane price hikes, want to pick up the energy bill for poorer households. Spain and Portugal plan to force price caps on their energy providers and to impose windfall taxes.

Expensive gas is setting off a terrible chain reaction in the UK already. CF Industries, one of the world’s biggest fertiliser producers with large manufacturing facilities in the UK, is throttling production of artificial manure to better cope with its now too costly feedstock, natural gas.

Its by-product CO2, needed as a coolant for nuclear plants and the production of dry ice, is in the UK almost exclusively supplied by CF, in normal times satisfying 60 per cent of the UK market.  The sudden dearth of CO2 is now negatively impacting everything from fizzy drinks to frozen food, from slaughterhouses and chicken farms (animals are doused with CO2) to bakery products.

UK consumers are not only facing a winter of heating poverty but meat shortages too, a deficit exacerbated by labour shortages. The Christmas turkey has just gained another lease of life into the New Year, when excess animals will have to be culled.

The US is scolding Europe today for having done too little to care for its gas supplies- Andreas Weitzer

In the wake of COVID-related supply disruptions (see my piece on loo-roll-economics from last month) a perfect storm is gathering strength. Worried by ever increasing transport bottlenecks and rapidly emptying gas buffer storage in Europe, Asian countries like Japan and China are aggressively bidding up LNG spot prices.

Spare capacities are predominantly directed to Asia these days, bypassing Europe. At the same time, Norway, Europe’s biggest producer of natural gas, is carrying out maintenance works of its infrastructure and the UK, having largely depleted its own North Sea resources, has nowhere to turn to. To add insult to injury, wind power is slacking, with wind intensities lower than at any time since the 1960s. In addition, the main electricity cable connecting France with the UK burnt through and needs repair.

The situation in Germany is equally worrying with spot prices for gas even higher than in the UK and storage dangerously low. The German Green Party, adamantly opposing nuclear power and coal, has long treated gas as the biggest evildoer, denying it any role as a bridge towards carbon neutrality.

The Greens were opposing any increase of Russian gas transport capacity to Europe –even more fiercely than the US, which for years had opposed and embargoed the Nordstream 2 pipeline, devised to double the capacity of Nordstream 1 between Russia and Germany.

While the German Greens were opposing gas in principle, the US, initially very keen to export their own overflow of fracking-derived LNG, emphasised ‘geopolitical risk’, canting about Europe’s dangerously increased ‘dependency’ on Russian gas.

This was of course poppycock, as in an interdependent, global energy market everyone sits in the same boat, as exemplified by today’s crisis. True to form, the US is scolding Europe today for having done too little to care for its gas supplies and is accusing Russia of ‘holding back’ urgently needed additional supplies.

The US, alas, has temporarily lost all interest to supply LNG to Europe. After lean years and many bankruptcies later, American shale gas producers are starved of capital and credit, and are unwilling and incapable to increase production meaningfully.

Russian officials gleefully point out that while they were accurately fulfilling all existing contracts with European energy buyers, it was not their fault that planned increases of pipeline capacity was embargoed for so long.

The truth is more likely to be the vastly improved transport capacity towards China, which is paying more and happy to have outmanoeuvred Europe with the help of the US. America, after all, has done everything possible to forge an ever closer cooperation between Putin and China, overcoming traditional antipathy. Gasprom is all the happier for this.

Gasprom’s sudden boost in profitability and geopolitical prominence has seen its share price rising beyond all expectations, riding a momentum created by narrative-obsessed, retail investors and professionals who bet on them.

Personally, I am quite vexed by this, having bought Gasprom shares at the nadir of the Great Financial Crisis for as little as six dollars per piece. For more than a decade, I suffered a slow- motion loss. Gasprom has been selling for years into a weak market and was prone to theft and costly plunders. Yet shortly before the market crash in March 2020, my shares suddenly doubled. I felt vindicated.

With COVID came the stock market crash and the next meltdown of energy prices. Gasprom shares tanked again. I lost my nerve and sold all my ADRs in May – at par, glad to have avoided a loss. Today, alas, I would sit on a 50 per cent profit.

The purpose of this column is to broaden readers’ general financial knowledge and it should not be interpreted as presenting investment advice, or advice on the buying and selling of financial products.

Andreas Weitzer is an independent journalist based in Malta.

andreas.weitzer@timesofmalta.com