Publications / Research Papers
Short-term effects of the Ukrainian crisis on the security of gas supply in Central-Eastern Europe and HungaryCompetition and regulation 2015 - books, chaptersPublished: 1 of November, 2015

In this paper the vulnerability and the short term resilience of the European gas market to supply side shocks are modelled. We analyse the effect of regulatory interventions on the wholesale gas price and welfare of the most vulnerable Central and Eastern European gas markets. A short term security of supply situation is modelled through a one month disruption of Russian gas supplies through the Ukraine in January, and a longer term crisis is modelled through a six month disruption on the same route. Three short term measures were analysed that aim to increase the resilience of gas markets to supply disruptions in the short run through the better use of existing infrastructure: by allowing spot trade on all interconnection points; allowing virtual trade against the physical flow; allowing bidirectional flows on all EU-EU borders. We found that the first two measures have rather local effect on the markets, but bidirectional physical flows increase the security of supply of the whole region - mostly because of better connecting Central and Eastern Europe to the Western gas markets. We conclude that Hungarian consumers realize significant part of the monetized benefits that we measure; hence Hungary has a profound interest in supporting the European gas market integration. In the analysis we also found that the Hungarian strategic storage is a useful tool to mitigate the damages of a potential crisis not only within the Hungarian borders but also on a regional basis.

The study is available at the website of the Hungarian Academy of Sciences