Europe is facing a potential “Lehman Brothers” event with energy margin calls of $1.5 trillion

European energy companies face margin calls totalling $1.5 trillion in the derivatives market. Many would need to support policy to cover them amid wild swings, and skyrocketing power and gas prices.

Helge Haugane is Equinor’s senior vice-president for gas and electricity. He said that the $1.5 trillion estimate was even more conservative.

As many energy companies struggle to meet their margins on the energy derivatives market, liquidity is dwindling.

According to Helge Haugane, “If companies have to put up so much money, it means liquidity in the market dries out and that is not good for the part of the gas markets.” Haugane explained to Bloomberg.

Some EU countries have already set up funds in order to prevent a collapse of the energy derivatives markets. Finland and Sweden announced plans to support their energy businesses trading in the electricity derivatives market. They are trying to avoid a “Lehman Brothers” event in their respective financial systems and energy industries.

“This has had all the ingredients for a kinda Lehman Brothers energy industry,” Mika Lintila (Finland’s Minister of Economic Affairs) said. This statement comments on the European energy crisis.

After Russia announced that Nord Stream’s gas pipeline to Germany would be closed indefinitely and cited the Western sanctions as the cause.

Finland discussed stabilization measures in the electricity derivatives markets. A central government scheme was proposed as a last-resort funding option for companies that are otherwise at risk of bankruptcy, the Finnish government stated in a statement.

Finland is looking to establish a loan-and-guarantee scheme worth up to $9.92 Billion (10 Billion euros), where the State can grant loans or guarantees for companies involved in electricity production in Finland.

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