The gradual decline in natural gas prices is giving households and businesses a breather. In the midst of economic pressure from Russia, in August last year, the price on the European Central Stock Exchange (TTF) reached 340 euros per MWh. Now, a few months later, the price has already dropped to 40 euros, and forecasts show that the prices that we saw in 2022 are probably in the past.

The price drop is due to several reasons. Gas consumption in Europe fell by 13% in 2022. This was the result of the four dynamics. First, mild winters have reduced the need for space heating. Secondly, large industries used alternative fuels such as oil. Thirdly, production in energy-intensive industries declined, without falling, however, in the pan-European index of industrial production. And fourth, consumers have changed their behavior.

Europe has succeeded in replacing Russian gas with liquefied natural gas (LNG), and European gas storage facilities are now more than 50% full (typically 33% at the end of March). While there are always risks for the future, the fear of undersupply has essentially passed for this winter, while ample inventory in warehouses prepares us for the next one as well. Now we are experiencing a new phase of the energy crisis.

The decline in the price of natural gas, of course, coincides with the ceiling on the European stock markets. The decision on the restriction was taken on December 19, 2022, but the time limit began in early September, when the Commission organized a technical workshop to collect opinions (Greece was one of three countries invited to present their opinions). In late September, with Greece playing a key role, energy ministers from 15 member countries sent a letter asking Commissioner Simpson to make a legislative proposal for the cap. This was the first time that a clear coalition had emerged in favor of a restriction from a combination of countries that could vote for it by a supermajority. The price of a TTF at that time was still around 200 euros.

Ahead of the European Council meeting in October 2022, the Greek Prime Minister published an article in Bloomberg in which he spoke in favor of the restriction. Combined with ongoing negotiations in the background, this political pressure led the European Council to accept the idea of ​​a restriction on 21 October. The message has become clear: Europe is ready to intervene. The price of gas still exceeded 100 euros.

There was a pause during which the Commission prepared its proposal. For a while it seemed that the ceiling would be very high – 350 euros (and then 275 euros). This was the only period when prices stopped falling. But it quickly became apparent that the core of the pro-capitalist states was one. After negotiations escalated in late November and early December and the final decision was made on December 19, prices began a steady downward trend that continues to this day.

Forecasts show that the prices we saw in 2022 are probably in the past.

In retrospect, it is clear that imposing the restriction would have saved Europe tens of billions of euros earlier. It is also clear that the Greek government’s argument has been vindicated by events: the restriction did not jeopardize the security of supply or lead to shortages, while fears of financial market volatility proved unfounded.

The ceiling and the price cut saved the country from many billions. We believe that Greece consumed 56.6 terawatt-hours of natural gas in 2022. For every €10 reduction in gas prices, a country saves €566 million in its trade balance. A €100 price change corresponds to an annual import of €5.7 billion. The benefits to the country are enormous.

The de-escalation in gas prices has also led to lower electricity prices. Last summer, the price of electricity on the Greek stock exchange often exceeded 400 euros per MWh, and in August it reached 700 euros. In March 2023, the average price was 125 euros, and on some days it fell below 100 euros. These prices significantly affect the general level of prices, and also confirm the correctness of the government’s policy to support citizens during the crisis.

The restriction itself did not lead to lower natural gas prices. But that was never the goal. The role of the cap was to bring order to a dysfunctional market and to show that Europe would not pay more than necessary to supply missing quantities. It was a process and a strategy that saved us many billions. And this victory will probably save us even more in the future.

Mr. Nikos Tzafos is the Prime Minister’s Special Adviser on Energy Matters.