[Economics] The German LNG dilemma - How Germany acts against Others and its own Population 2024-02-12

The German federal government sabotaged its own supply of natural gas. And with the supposed solution to fill the own storage for natural gas the price level for natural gas was unnecessarily increased. This caused serious damage to the own population and other importers of LNG.
The judgment of the Federal Constitutional Court (Bundesverfassungsgericht) that the previous federal budget has been made void also caused the German federal government to cut subsidies for consumers. Furthermore the largest natural gas supplier of India Gail made claims as compensation for failed LNG deliveries from the German gas supplier Sefe (formerly Gazprom Germania).

Original Price Increase

In 2021 in Germany the end consumer prices for natural gas were at approximately 5 cents/kWh and for electricity at approximately 27 cents/kWh. And in December 2023 the prices were at approximately 12 cents/kWh for natural gas and at approximately 40 cents/kWh for electricity. This price increase can essentially be attributed to the decisions of the German Federal Government itself to fill the local gas stores as soon as possible. After the German Federal Government has called for the second of three levels of alert about a shortage in June 2022. The German Federal Government had publicy announced to save the country from an impending scarcity of natural gas. [1] [2]

For this the company Trading Hub Europe (THE) has been given the sovereign order to fill the gas storages at the technically maximum speed. The price should explicitly not be respected while purchasing. When viewed from the outside Germany emptied the market for LNG.
This behavior has caused two predictable consequences. By not paying attention to the price excessively high prices were inevitably paid. In fact since June 2022 the price rose from approximately 80 Euros/MWh to up to 337 Euros/MWh. And the money for these price levels with inevitably come down to the end consumers.
In addition a shortage of the finite resource natural gas was forced on the worldwide market. This shortage led to the fact that other customers could no longer cover their needs. [3]

This behavior was neither expedient nor necessary. Purchases could have started earlier and could have happend over a longer time. For this purpose schedule transactions could have been agreed. At the beginning the gas storagess had a level of approximately 50% and were then filled up to the winter within 6 months. Especially in winter the need is higher due to the heating season. But the gas storages had a level of approximately 60% at the end of March 2023. [4]

The Shortening

Due to the conscious political decisions the EU and especially Germany have become dependent on LNG from the USA. This dependency relies on the international supply of LNG as the EU was not previously a significant importer of LNG. There was a lower LNG supply simply because there was less demand for natural gas in liquefied form. Thus the announcement by the US government that it will not build any more LNG terminals is all the worse. [5] [6]

From 2021 to 2023 the EU imported around 40% LNG measured by the its entire import of natural gas. During the same period about 50% of this LNG came from the USA. Due to the long distances to consumers measured from the coast this natural gas is also traded across national borders and thus distorts further statistics.
From 2022 to 2023 the Germany imported a maximum of 20% LNG measured by the its entire import of natural gas. And in August 2023 about 80% of this LNG came from the USA. In total these are only 16% LNG from the USA. But due to the trade of LNG across national borders the real proportion is certainly higher. [7] [8] [9] [10]

Eliminated Energy Price Brake

The German federal government had announced to slow down the increasing costs and introduced the so called electricity price brake (Strompreissbremse) and gas price brake (Gaspreisbremse ) for natural gas and district heating. But due to the latest budget crisis these measures will expire April 2024. They limit the prices at 12 cents/kWh for natural gas and at 40 cents/kWh for electricity for 80% of ones previous year's consumption. The elimination will therefore only have a low impact. But future increases beyond the previous limits will no longer be capped and are already publicy announced as a new normality. [11]

Gail

Now the Indian natural gas supplier Gail makes claims as compensation from the German gas supplier Sefe of around 1.8 billion US-Dollar. The reason for this is that Sefe has not fulfilled his contractual obligations in 2023. This being the annual delivery of 2.5 million tons LNG to Gail. [12] Sefe was previously Gazprom Germania German based subsidiary of the Gazprom Group. Gazprom Germania was placed under the trust of the German Federal Network Agency (Bundesnetzagentur) in 2022 and thus nationalized. And Gazprom Germania was responsible for a delivery of natural gas to India with a term of 20 years. And according to German law such contract obligations were retained by the German state. [13]

The non foresighted purchasing policy of the German Federal Government has therefore pushed the customer Gail into a supply gap. And the unprofessional sanction policy of the German federal government violated contractual obligations. And if SEFE is convicted to making a payment as compensation on Gail the required money can only be paid with tax money. [12]

Die nicht vorausschauende Einkaufspolitik der deutschen Bundesregierung hat also den Nachfrager Gail in eine Versorgungslücke gedrängt. und durch die unprofessionelle Sanktionspolitik der deutschen Bundesregierung wurden Vertragsverpflichtungen verletzt. Und wenn SEFE dazu verurteilt wird eine Schadenersatzzahlung an Gail zu leisten, dann kann dies nur aus Steuergeld gezahlt werden. [12]

[1] Bundesministerium für Wirtschaft und Klimaschutz ruft Alarmstufe des Notfallplans Gas aus – Versorgungssicherheit weiterhin gewährleistet - 2022-06-23
https://www.bmwk.de/Redaktion/DE/Pressemitteilungen/2022/06/20220623-bundesministerium-ruft-alarmstufe-des-notfallplans-gas-aus.html
[2] Wie ein gelernter Schornsteinfeger massenhaft Gas für Deutschland kauft - 2022-08-04
https://www.spiegel.de/wirtschaft/energiekrise-die-gashamster-zu-besuch-bei-trading-hub-europe-a-d663942e-bd73-453c-b5bb-bd87aef4df03
[3] Gaspreise Großhandel in EUR/MWh
https://www.bundesnetzagentur.de/DE/Gasversorgung/aktuelle_gasversorgung/_svg/Gaspreise/Gaspreise.html
[4] Verlauf der Speicherfüllstände in Prozent
https://www.bundesnetzagentur.de/DE/Gasversorgung/aktuelle_gasversorgung/_svg/Gasspeicher_Fuellstand/Speicherfuellstand.html

[5] Biden pauses LNG export approvals after pressure from climate activists - 2024-01-26
https://www.reuters.com/business/energy/biden-pauses-approval-new-lng-export-projects-win-climate-activists-2024-01-26/
[6] Biden stoppt neue LNG-Exporte: Woher bekommt Deutschland nun Flüssigerdgas? - 2024-01-26
https://www.berliner-zeitung.de/wirtschaft-verantwortung/biden-stoppt-lng-woher-bekommt-deutschland-nun-das-fluessigerdgas-li.2180975
[7] Woher Deutschland sein Flüssiggas bezieht - 2023-09-07
https://de.statista.com/infografik/30782/deutsche-lng-importe-nach-herkunftsland/
[8] Woher Deutschland sein Gas bezieht - 2023-12-21
https://de.statista.com/infografik/30706/taegliche-gasimporte-nach-deutschland-nach-herkunft/
[9] LNG: Wie viel Flüssigerdgas kommt derzeit in Deutschland an? - 2024-02-01
https://www.ndr.de/nachrichten/info/LNG-Wie-viel-Fluessigerdgas-kommt-derzeit-in-Deutschland-an,lng632.html
[10] European natural gas imports - 2024-01-31
https://www.bruegel.org/dataset/european-natural-gas-imports
[11] Staatliche Obergrenze - Lindner für verlängerte Energiepreisbremse - 2023-09-21
https://www.tagesschau.de/wirtschaft/verbraucher/energiepreisbremsen-lindner-100.html
[12] Milliarden-Streit wegen Gazprom-Verstaatlichung: Indien verklagt Deutschland - 2023-12-14
https://www.merkur.de/wirtschaft/steuerzahler-gazprom-verstaatlichung-sefe-gail-russland-putin-indien-verklagt-deutschland-zr-92718941.html
[13] Verstaatlichung - inklusive Sicherheitsrisiko? - 2023-04-03
https://www.tagesschau.de/investigativ/wdr/gazpromgermania-verstaatlichung-russland-spionage-101.html