Europe’s gas stockpiling could cost energy users and taxpayers billions, according to a report by Bloomberg.
After Russia began to starve Europe of natural gas last year, suppliers started to hoard the energy source in preparation for the winter.
From a security point of view, stockpiling can be a positive, but much of the commodity was bought at record prices, with natural gas peaking at US$9.66 per metric million British thermal unit (MMBtu) last August.
Since then, however, prices have fallen to their lowest point in 18 months, with natural gas trading at US$2.52/MMBtu.
As a result, any sales of natural gas could cost energy users and taxpayers billions, the report suggested, given some of the fuel was bought with state money and partly financed from network charges paid by gas consumers.
According to the report, which cites data from Gas Infrastructure Europe, regional inventories are about 65% full on average, higher than usual for this time of the year.
However, it does create a dilemma for some suppliers, who bought the gas at its peak and would ultimately be forced to sell at a loss unless prices rocket once again.
One way in which companies can protect themselves against price volatility is to hedge the price, where they agree on a pre-determined buying and selling price in an effort to limit losses.