The recent plunge in international gas prices appears to have neutralized a retail price advantage that had been gained by heating oil, made possible by generous subsidies. Natural gas and heating oil are now at similar price levels for November.
Though natural gas suppliers have yet to announce retail prices for November, their price levels for the month are widely expected to remain unchanged compared to October, at a level of between 11 and 12 cents per KWh.
Besides a subsidy offered by gas utility DEPA, gas prices are also shaped by the TTF benchmark average of the previous month. Amsterdam’s TTF benchmark ended October at levels of between 135 and 145 euros per MWh, well below levels of 200 to 210 euros per MWh a month earlier.
In response, DEPA has greatly reduced its subsidy for consumers from 9 cents per KWh to 2.5 cents per KWh. Deducting the reduced 2.5 cent subsidy results in a retail natural gas price of 11 to 12 cents per KWh.
Heating oil will also be sold at roughly this level, or marginally higher, announcements made yesterday by the country’s refineries and their retail arms, for an extended period of heating oil subsidies, have shown.
ELPE announced it would extend its 6 cent heating oil subsidy (7.5 cents with VAT) until November 15, while Motor Oil informed it will continue offering a price as competitive as that of October.
As a result, consumers can expect heating oil to be priced at less than 1.40 euros per liter for at least another 15 days.
Heating energy cost comparisons for November regarding natural gas and heating oil remain unclear. Should gas utility DEPA reduce its subsidies, as is anticipated following a sharp recent drop in international gas prices, heating oil would become marginally cheaper, even if heating oil subsidies at refineries are disrupted, as long as the Brent index does not continue rising.
The retail price of natural gas in Greece is currently at 11 to 12 cents per KWh, a level that would exceed 20 cents per KWh without DEPA’s subsidy of 9 cents per KWh. Subsidies of such extent are currently unnecessary as a result of the recent plunge in natural gas prices, dropping to 99 cents per MWh (TTF) yesterday.
This major drop in gas prices will inevitably prompt a reduction in gas subsidies. It is still unclear if energy minister Kostas Skrekas will make any related announcements today or hold back for a latter date.
Heating oil prices have been subdued at a level of 1.35 euros per liter, or 12 to 13 cents per KWh, as a result of two separate subsidies, a state subsidy, to be provided until at least the end of the year, worth 25 cents per liter, and an additional subsidy of 7.5 cents per liter, being offered by refineries until the end of October, according to their announcements. It remains unclear if refineries will continue subsidizing heating oil beyond October.
Natural gas heating has regained its place as a lower-cost heating option to heating oil, courtesy of a gas subsidy support. At current price levels, natural gas heating is estimated to be approximately 20 percent cheaper than heating oil.
Gas suppliers have set their October prices for households at levels of about 0.11 euros per KWh, unchanged from last winter. Subsidies offered by state-controlled DEPA Commercial will reduce this price level to 0.09 euros per KWh. Without any subsidy support, gas prices for household heating would just about double to 0.21 euros per KWh.
Unlike gas suppliers, heating oil suppliers have not been able to set their prices, despite the fact that winter trading for this fuel begins in two days, as a result of wildly fluctuating prices in markets, making it impossible to make projections.
Given the current market conditions, heating oil prices will be set anywhere between 1.40 and 1.50 euros per liter, a level of about 1.45 euros per liter seeming most probable.
These heating oil price levels take into account state subsidies of 0.25 euros per liter. Without the state subsidy support, heating fuel would reach between 1.65 and 1.75 euros per liter.
Heating fuel prices are likely to begin the winter trading season, starting October 15, at an elevated level of between 1.50 and 1.55 euros per liter, market officials have indicated.
Heating fuel subsidies, to be offered to households based on income criteria, stand to lower heating fuel prices to between 1.15 and 1.20 euros per liter.
Pricing predictions for winter remain uncertain as petroleum firm officials are awaiting the impact of a recent OPEC decision to cut back on output before finalizing their calculations. Market developments this week will be instrumental in the level of heating fuel prices to be set by petroleum firms.
If confirmed, heating fuel prices of between 1.50 and 1.55 euros per liter would place struggling households under even greater financial pressure. Fuel-based heating has been seen as a favorable option by many households for this coming winter, given the hefty electricity price increases. However, heating fuel prices of between 1.50 and 1.55 euros per liter would act as a deterrent for many households.
Gas heating, taking into account a gas subsidy of 90 euros per thermal MWh offered by gas company DEPA Commercial, is expected to cost 0.11 or 0.12 euros per KWh in October, sources informed.
At these levels, gas heating remains a lower-cost alternative to fuel-based heating for households not eligible for heating fuel subsidies.
The energy ministry has announced a natural gas-heating subsidy of 9 cents per liter, making gas heating the lowest-cost heating solution for households – compared to fuel and electricity – despite a 300 percent natural gas price increase compared to a year ago.
This gas subsidy comes as crucial support for the mass of households that took pre-crisis decisions to convert to gas heating over the past decade or so, only to see gas prices skyrocket in recent months.
Taking into account the gas subsidy, announced yesterday by energy minister Kostas Skrekas, gas heating will begin the winter season at 12 cents per liter (120 euros/MWh), below the cost of 13 to 14 cents per liter for heating fuel and 16 cents for electricity heating.
The gas heating subsidy level is based on the assumption, by gas companies, of TTF price levels of roughly 200 euros per MWh in coming months.
Given the aforementioned figures, the heating cost for a 100 square-meter apartment requiring 9,000 KWh for heating over a winter is 1,000 euros for gas heating, 1,250-1,300 euros for fuel heating, and 1,450-1,500 euros for electricity heating.
Without the gas heating subsidy, the resulting gas heating cost, priced at 21 cents per liter, would reach nearly 2,000 euros for a 100 square-meter property.