The European collegiate management is euphoric – there is plenty of gas in store. There is no need to rush to replenish stocks, even despite a drastic drop in supplies from the Russian Federation. Therefore, you can try to conduct a risky experiment with joint purchases of fuel for the next season. Steven Stapczynski, senior energy reporter at Bloomberg, assesses the chances of successful joint international gas purchases to prevent price spikes.
According to the expert, joint purchases only make a lot of sense on paper. By working together, companies can increase their buying power and reduce competition, which can quickly escalate into a market war, however.
Bow down to the industry’s skeptical response!
- says the expert.
Although 65 companies have registered to buy gas on the new European platform, it is still unclear whether the region’s largest importers, such as Germany’s Uniper SE or France’s Engie SA, will use this mechanism, and how many, if any, purchases will take place.
The specialist’s assumptions are based on clear historical experience that has been accumulated to this day. For example, the joint efforts of North Asian countries to buy gas have reached an impasse. Buyers in Japan, South Korea and China signed an LNG trade cooperation agreement in 2017. Fast forward to today – nothing happened.
The world will soon know whether European natural gas traders can work together for the common good. In fact, everything turned out to be much more complicated. Gas buyers have set up bureaucratic business departments that tend to prioritize profits (and bonuses) over helping competitors. Without strong financial stimulus or government intervention, joint purchasing is unlikely to see significant growth.
And perhaps the biggest problem: group buying essentially requires the participation of all parties without exception, so the scheme will work. If the biggest consumers are not involved, suppliers will simply move on to the highest bidder elsewhere.
As you know, gasoline prices have recently fallen to their lowest level in more than two years and there is no need to reduce them further. But in general, the seller’s rules still govern the market. It remains to be seen if the combination of customers will bring victory to the other side, or if the innovation will suffer the same fate as a similar ambitious project in Asia.
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