Linking gas prices to the TTF (Title Transfer Facility) in Amsterdam, the virtual exchange based in the Netherlands where energy supplies are negotiated, has enormously increased financial speculation thanks to the so-called futures contracts, thus exposing the European states to a disastrous increase in energy costs, especially in a situation of tension and geopolitical instability such as the current one. This is what emerges from an unofficial report – the so-called “non-papers” – drawn up by the same officials of the European Commission in view of the Council of Energy Ministers held last Friday. In the not paperconsisting of 17 pages, officials admit that the Dutch virtual market is small and with one price volatility out of control which risks bringing the entire European economy to its knees. This basically amounts to an implicit admission of guilt by the European Union itself, because it was the Commission that decided in 2003 to interrupt the signing of long-term contracts with Gazprom to move on to link the listing to the market laws, with the fluctuations in value given by the dynamics of supply and demand established on the Amsterdam stock exchange. This decision was taken, among other things, despite the strong opposition expressed by the Russian energy giant. The objective of the European Commission, in fact, was the liberalization of the energy sector.
The TTF was established as an alternative to the National Balancing Point, the UK gas market, with the support of the ICE (Intercontinental Exchange), the financial platform giant founded in 2000 with the support of the large banks which also controls the New York Stock Exchange. It goes without saying that the more exchanges take place on the TTF, the more ICE it earns. Not surprisingly, the volumes traded in Amsterdam have grown exponentially in the last two decades and currently represent over 14 times the amount of gas used by the Netherlands for domestic purposes: in particular, the report highlights that, “according to ICE data , in 2020 the volume of trade increased by 24%, after having witnessed a growth of 100% in the last two years ». This allowed the ICE group to register a growth of 10% of its own revenues in the energy sectorequal to 1.2 billion dollars.
Despite being a small market, hedge funds and energy companies have increasingly adopted the Amsterdam Stock Exchange as reference index for determining the price of gas at continental level, linking supplies to the previous quarter’s performance of futures contracts. So much so that the non-report states that “despite being indicative of the north-western market, thanks to its commercial volumes and liquidity, the FTT influences other European trading centers that would otherwise be closer to the import prices of LNG”. Furthermore, it is emphasized that the values of the TTF are 30% higher than the average of the prices recorded in the virtual trading points of the other European countries and this due to theextensive use of futures contracts. These contracts bet on the “future” price of gas (or other real goods called commodities) and the current situation in Ukraine together with Gazprom’s stop of Nord Stream, suggesting a drop in supplies, gave the pretext in order to be able to carry out speculations: even when gas still arrived regularly – that is, before Gazprom stopped the Nord Stream – the only fear that in the future the quantities could decrease justified upward bets which have led to the exponential increase in prices in Europe. This could not happen in a more regulated market or through the stipulation of long-term contracts independent of the dynamics of supply and demand.
The non-paper by European officials, therefore, examines the possibility of “freeze »the price of the TTFbut having acknowledged that this could cause many problems and undermine the “credibility of the market”, the report immediately suggests two other solutions: subject the FTT to financial supervision And develop a complementary European index for imported gas transactions. “A parallel and more harmonized European index in terms of regional balances and sources of supply that brings together the different European indices can represent a valid alternative”, reads the report.
In summary, the European Commission is studying countermeasures to remedy the negative consequences that derive from its own decisions: the liberalization of the energy sector, in fact, has once again allowed financial funds and private groups to speculate and enrich themselves excessively in the face of rampant inflation that has hit European citizens, thus confirming the nefarious implications of liberalization which represents the guiding star of European economic policies. Now, the Commission itself has had to admit the disadvantages and imbalances of this approach, developing some alternatives to free market mechanisms which, however, have not yet been implemented. It is therefore a question of understanding whether the community executive will have the will to move from hypotheses to facts quickly with the aim of containing as much as possible the economic damage in the Old Continent.
[di Giorgia Audiello]
#admits #energy #inflation #due #speculation #Amsterdam #stock #exchange