Panic Journal – Ukraine/Russia edition part 4: Power & Gas prices, Merit Order and other Ramblings
Background:
With European Gas and Electricity prices trading like “Meme stonks”, it is time for another “panic post”. As always, these posts are mostly for myself in order to better structure my thoughts and educate myself and should not be seen as any kind of advice.
Just to quickly revisit the last post from part 3. One of my predictions back then with regard to the economic impact (unfortunately) aged quite well:
One explanation that I have read is that Russia and Ukraine are only 2% of Global GDP, so a “loss” of these countries is no big deal. Personally, I do think that this is not a very useful number. Russian oil and gas is powering a significant amount of European (and Global) GDP. A supply disruption from Russian oil and gas would impact a much larger share of GDP globally and might make Covid-19 supply chain disruption like a toddler party.
Turmoil in European Gas and Electricity markets:
The fact that European Gas and electricity markets face absolute mayhem has now clearly reached the headlines. I have stolen two Charts from Twitter(@Schuldensuehner), one showing electricity prices until yesterday, and one natural gas: