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.
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.
Heating fuel subsidies will continue being offered universally in Greece this coming winter, but at a higher level, up to 20 cents per liter, or 25 cents per liter including VAT, along with more generous income criteria, as the government wants to make fuel-based heating the lowest-cost heating solution this winter in order to minimize the number of households turning to electricity for heating.
Increased electricity usage would mean increased demand for natural gas, the costliest energy source at present. Natural gas represents roughly 40 percent of overall electricity generation in Greece.
The new subsidy package for fuel heating is expected to enable all consumers to purchase heating fuel at a level of 1.30 to 1.40 euros per liter, instead of 1.60 euros per liter, the price level if supply were to start now.
Heating fuel subsidies in Greece were worth a total of 174 million euros last winter, a sum seen rising to 300 million euros this season.
The number of households eligible for heating fuel subsidies is expected to increase to 1.3 million from 800,000 last winter as a result of a planned income criteria revision widening the offer’s eligibility.
The offer’s personal income criterion is expected to increase to between 17,000 and 18,000 euros per annum from 14,000 euros at present for single-resident homes, while corresponding income criteria rises will be made for families.
Heating fuel demand skyrocketed 185 percent in October compared to the equivalent month last year, despite higher price levels, 45 percent over prices registered a year ago, a trend that has been attributed to three main factors.
Firstly, households have been encouraged to use their oil-based heating systems by a broader subsidy support package introduced for this winter, expected to benefit one million households with amounts ranging from 100 to 750 euros. Last winter, approximately 700,000 households were eligible for heating fuel subsidies.
Secondly, households are placing heating fuel orders now fearing further price rises could lie ahead.
Thirdly, the sharp increase in electricity costs brought about by the energy crisis has prompted consumers to put aside electric heaters and return to oil-heated radiators, which, in many cases, had been left unused for some years.
A latest edition of the Saving at Home program subsidizing energy efficiency upgrades of households, expected to be announced towards the end of this coming summer, will be revised to feature climate and income criteria, reflecting a system already used to determine heating cost subsidy levels.
A chart previously prepared by the National Meteorological Service (EMY) to determine heating subsidy allocations will now also be adopted for the energy ministry’s latest Saving at Home program, sources informed.
The existing EMY model will be tweaked to better suit the Saving at Home program, taking into account both heating and cooling needs of individual households. Income criteria will also be taken into account, prioritizing lower-income households. Applicants with plans for energy efficiency upgrades of higher degree are also expected to benefit.
The EMY chart divides the country into 200,000 plots, offering respective details on average temperature levels and number of hours of heating needed in a day by households. A point system determines the level of heating subsidies entitled by each area.
The Technical Chamber of Greece (TEE) will also contribute to the energy ministry’s effort for the next Saving at Home program.
Petroleum product traders are troubled by government thoughts to broaden the eligibility of heating subsidy support so that, besides heating fuel, three new categories, natural gas, firewood and pellets, are also added to the list.
Contrary to natural gas, heating fuel is overtaxed, while the encouragement, through subsidies, of firewood as a heating source does not make environmental sense given the high levels of resulting smog, petroleum industry sources have pointed out.
High levels of smog have been recorded in Greek cities during winters over the past decade or so as struggling households have sought lower-cost heating amid the recession.
Heating subsidies are already limited and barely cover the needs of underprivileged households, petroleum industry officials have noted, fearing their share of the total could diminish if other heating sources also become eligible.
Heating fuel supply for the approaching winter season began yesterday at a level of 77 cents per liter, 2 cents lower than the price level at the close of last season’s trading, in May. Heating fuel prices are forecast to remain low, sources said.
Despite the lower price level, demand was subdued on opening day, yesterday. Many consumers took advantage of last season’s price drop and are already stocked up. In addition, temperatures around Greece remain mild.
Lower natural gas prices are expected to lead to marginally reduced heating costs this winter for households relying on this energy source. On the contrary, heating fuel price levels have so far remained unchanged compared to last winter.
EPA Attiki, supplying natural gas to the wider Athens area, has set a price of 5.1 cents per KWh, effective as of today, down from 5.4 cents per KWh in September and an average price of 5.6 cents per KWh last winter.
The latest price levels make natural gas 42 percent cheaper than heating fuel and 68 percent cheaper than electricity.
A growing number of households are switching to natural gas for their heating needs. Besides a recent sector reform enabling flat owners to freely withdraw from old collective apartment block heating fuel arrangements, as well as a successful gas subsidy program that ended in October but is expected to be relaunched in 2018, households are also turning to natural gas as a result of an uncertainty surrounding heating fuel subsidies.
Though heating fuel purchases for the upcoming winter began roughly one month ago, no details have yet to be provided on this season’s heating fuel subsidy criteria.
The government has already announced it will cut heating fuel subsidies by more than half in 2018, to 50 million euros from 110 million euros. Stricter income and property-based criteria are expected to apply. Consequently, either fewer households will be eligible or heating fuel subsidies will be lowered.
Last year, heating fuel subsidies of 25 cents per liter were offered to eligible households.
A decision by the finance ministry on this year’s level is not expected for some time as the first round of heating subsidies will not be made available until January.
Without a doubt, the additional strain to be felt by households stands to negatively impact the trading activity of petroleum companies.
Heating fuel prices commenced trading today for the upcoming winter season at levels of between 93 and 95 cents (euro) per liter in the wider Athens area, matching last season’s opening price levels.
This time last year, heating fuel began trading at around 93 cents and closed the season at 97 cents.
Sector officials have forecast little chance of any major price changes during the season.
However, anticipated heating fuel subsidy changes, needed as a result of a confirmed cut in national budget heating subsidy provisions from 110 million euros last year to 55 million euros this year, could seriously impact household consumption levels and oil trading company performances.
The finance ministry has yet to deliver a final decision on the new subsidy details. Either subsidy levels or eligibility criteria, or, perhaps both, could change. Last year, eligible households received heating fuel subsidies worth 25 cents per liter.
On the contrary, natural gas is continuing to gain a widening advantage over heating fuel, as highlighted by its deepening market penetration in Athens, Thessaloniki and Thessaly.
Natural gas prices are expected to range between 30 and 40 percent lower than those of heating fuel this winter.
In a letter forwarded to the government, POPEK, the country’s fuel station trading association, has called for a drastic reduction of the special consumption tax (EFK) imposed on heating fuel, noting that a rate hike failed to deliver the desired tax revenue results from this tax while also depriving households of heating fuel.