How do you determine the price of energy? Some items for analysis in the face of the emergency that has developed with the conflict in Ukraine. What needs to be done to boost renewable sources of energy, i.e. energy that is not consumed?
by Alberto Ferrucci
published in Città Nuova on 28/03/2022
Energy. The international price of - energy and non-energy - raw materials is normally established in long-term contracts, with a fixed quota and one linked to the average price on the free market; these prices are very volatile, calculated on the daily average of raw material exchanges, which can go through the roof or collapse due to the difference between supply and demand, and because of the most diverse factors.
Although they are only a small percentage, free market exchanges move large volumes of money and have a significant influence: the contents of an oil tanker travelling from the Arabian Gulf to Europe can be bought and sold dozens of times between ‘traders’, intermediary companies that operate at the service of industries; with their speculative activity they contribute to the formation of raw material prices, in the case of oil those of Brent and WTI crude oils that we find on the Internet.
The natural gas market works in a similar way: the pipelines directly connect the producer and the consumer, but along their route the gas can also be diverted to underground deposits to store the quantities that would not be used in the summer months.
It is also in these depots that the gas in excess of the minimum contract volumes is stored: In Europe, Siberian gas can be stored in both Russian and European deposits: according to the international press, in recent months Russian Gazprom has favoured storage in its Russian deposits rather than in the European deposits it manages: the European Community is now asking operators to have deposits filled at least up to 90% by the beginning of winter.
Natural gas transported by pipeline is regulated by long-term contracts, with the variable part of the price correlated to the free price of oil: in recent months this has roughly doubled, while the price of natural gas traded between ‘traders’ has increased sevenfold.
Liquefied natural gas, LNG, is loaded onto gas ships in the producer countries to be introduced into the networks of the consumer countries after being re-gasified: in Italy it can be received in three maritime terminals equipped to unload it; some Italian regions in recent years have refused permits to those who proposed to equip our coasts with further gasification plants, refusing even floating solutions that have no impact on the territory: however, with the latest decrees the Draghi government is mending its ways.
Lately the LNG market has been well supplied by American gas, which is more damaging in terms of emissions than Russian gas, because it is extracted by fracturing compact rocks soaked in hydrocarbons, with methane emissions into the atmosphere: the invasion of Ukraine deprives us of a resource with less environmental impact, which we could have received through the Nord Stream 2 pipeline, now blocked by Germany because of the invasion of Ukraine.
One more reason to reduce our gas usage as soon as possible by boosting the use of solar and wind power, perhaps even at the cost of some sacrifice to the landscape, which in any case would not be irreversible, because in 30 years' time it will be possible to dismantle all the wind turbines.
In recent months, in the nuclear fusion plant of the ITER consortium, of which Italy is an important partner, for the first time in Great Britain a ‘small sun’ is being developed, producing a considerable amount of energy in recent experiments: but we will only have unlimited cheap energy in thirty years' time.
Until then, to demand that the state has to go into debt in order to allow citizens to consume unlimited amounts of cheap energy is to take possession of it to the detriment of the citizens of financially weaker countries in order to take more of the available energy at their expense, when we are already consuming far more than the world average.
With regard to gas prices and possible fraud, the government should adequately control prices and trading companies, subsidising energy-intensive companies most dependent on free market prices and the basic energy consumption of lower-income households.
However, the question should be asked why the global energy consumption is higher than the capacity to produce new renewable energy, leading to a return to fossil fuels and impossible prices.
Perhaps we have not turned enough attention to the most renewable energy of all, 'that which does not get consumed'; 40% of our country's emissions are linked to heating and air conditioning in homes, and we should devote ourselves to bringing them all up to the maximum level of insulation: the Italian government is investing a lot in this sector - too much, in my opinion - giving the 110% Super Bonus to the wealthiest Italians, those who have been able to organise themselves.
Perhaps it would have been more appropriate to make it compulsory within ten years, at least for urban conglomerates, to upgrade to the highest level of insulation, allowing a lower but automatic subsidy and guaranteeing, when required, the financing of the work, to be repaid in time to recover the cost through energy savings.
Photo credits: Energy and Geopolitics TS of (AP Photo/Evan Vucci, Pool, File)
