A nightmare week for the Eurozone which saw gas prices soar. At the beginning of the week the gas prices were up to 40% higher with the speculation being high and of course with the fluctuations being very wide. On Wednesday and Thursday and after the actions taken by the Russian President, the prices met strong pressure and at this time the losses jumped at 24%. There have even been recorded losses of 35%.
It is of particular interest, in our view, to make a comparison with the prices of timber at the beginning of the second quarter of the year, when the increase in demand after the pandemic, due to the rise in construction, led to a sharp rise in prices. The percentage of the increase may be higher in the case of gas, but the signs of speculation are evident in this case as well. The next few days will be crucial for the course of gas prices, with the possibility of following the course of timber being quite probable.
Europe is once again paying for its fail energy choices, with the economic costs this time being unbearable. President Putin extended a helping hand, which resulted in a de-escalation of prices and now the game is in the field of politics. In case an agreement is reached to increase supplies from Russia, then the de-escalation of prices will be very fast, without this meaning that it will be final.
Economic activity in the Eurozone is already facing the consequences of this increase with many industries shutting down or underperforming as they can not afford the costs. And all this at a time when winter in Europe is approaching and consumers are starting to turn on their heaters.
In a later stage, the shut down of Europe's industries will result in an even greater deterioration of the problems that the supply chain faces. The ammonia industry SKW Stickstoffwerke Piesteritz GmbH, announced to interrupt the production as it is now unprofitable. It is a fact that now the pressure on the Commission and the governments for support measures will increase significantly.
On the other hand, companies related to the production of natural gas have benefited significantly from both the rise in gas prices and the rise in oil prices.