HomeMediaLatest NewsExpensive gas in Europe poses a hidden problem for Russia

Expensive gas in Europe poses a hidden problem for Russia

02 September 2021

Salikhov Marcel R. President, Principal Director on Economic Studies, Head of the Economic Department

Marcel Salikhov, Director of the Center for Economic Expertise of the Higher School of Economics (HSE), commented to Nezavisimaya Gazeta on the possible problems of Russian exporters associated with high current gas prices in Europe.

The current level of gas prices is extremely high for the European market, Marcel Salikhov says.

“This increases Gazprom's earnings at the present time, since more than 80% of exports to Europe are pegged to prices at hubs. However, it creates problems in the long-term,” he is sure.

High prices negatively affect demand. “The short-term price elasticity of gas demand is quite low. However, in the long term, gas has alternatives - higher prices make these alternatives more competitive. In particular, in the electricity sector, price competitiveness is increasing compared to gas generation,” the scientist notes. In addition, high prices stimulate a supply response. The obvious prospect will be an increase in shale gas production in the United States and LNG export.
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