Natural Gas Prices Haven’t Been This Low Since Russia Went to War

EconEye Admin

3 years ago

Natural gas prices in Europe are tumbling. Record-breaking warm weather and efforts to use less gas have helped. Europe is boosting imports from Norway and buying imported liquefied natural gas. Consumers in countries with a price cap for a set period aren’t paying lower prices yet.—cnn.com

Answer the following questions to check your understanding of the story.

Why are natural gas prices in Europe tumbling?

Natural gas prices are tumbling because the demand for natural gas is ____________.

a) decreasing and the supply of natural gas is increasing

b) decreasing more than the supply of natural gas is decreasing

c) decreasing with no change in the supply of natural gas

d) increasing less than the supply of natural gas is increasing

Wrong! - Europe is experiencing record-breaking warm weather and making efforts to use less gas. How is Europe’s demand for natural gas changing? The EU is increasing imports of natural gas from Norway and “buying imported liquefied natural gas. How is Europe’s supply of natural gas changing?

Correct! - Record-breaking warm weather and efforts to use less gas are decreasing the demand for natural gas. And an increase in imports from Norway and buying imported liquefied natural gas is increasing the supply of natural gas.

Why are consumers in some countries not paying lower prices yet?

Consumers in some countries aren’t paying lower prices yet because ____________.

a) some countries set a price floor and a price below the price floor is illegal

b) countries that set a price floor aren’t allowing the price to fall to the market price for a set period

c) countries that set a price ceiling aren’t allowing the price to fall to the market price for a set period

d) some countries set a price ceiling and a price below the price ceiling is illegal

Wrong! - When Russia cut supplies of natural gas to Europe, the market price of natural gas rose. Would European countries set a price ceiling or a price floor to make the price of natural gas more affordable?

Well Done! - When Russia cut supplies of natural gas to Europe, the market price of natural gas rose. To keep the price affordable, some European countries implemented a price ceiling on natural gas and legislated that the price must equal the price ceiling for a set period. At the time of implementation, the price ceiling was below the market price. Now the price has fallen below the price ceiling, and in normal times the price would fall to the market price. But in this market, a price below the price ceiling is illegal so consumers will not benefit until the price ceiling is removed.

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