Energy Security: Futures Contracts and Strategic Reality
The view that backwardation (an inverted futures market) is, in itself, an indication of a future decline in prices is not borne out by either theory or experience.
Three key factors are at play: the shift from price flexibility to energy rigidity, the time lag between markets and political institutions, and the repeated inaccuracies of long-term price forecasts. This was also demonstrated by the unfulfilled promises of 2000 to reduce the cost of European electricity, which remains fixed and prohibitively expensive for consumers.
In this context, inelasticity means that the demand for natural gas for heating and baseload electricity generation remains essentially inflexible. Even when prices rise dramatically, consumption falls only slightly in the short term, because there are no immediately available alternatives. Indeed, when major geopolitical shocks occur, the energy market undergoes permanent structural changes, such as the closure of industrial plants, the reorganisation of trade flows and the incorporation of permanent risk premiums into prices.
Under these circumstances, the market rarely returns to its previous equilibrium, even when pressures in the spot market ease. In other words, it is very difficult to see a genuine reduction in energy prices, and such promises should be avoided.
Backwardation presupposes a relatively smooth return to a lower-cost environment. In practice, however, major geopolitical and energy shocks permanently disrupt the assumptions on which financial curves are based.
Rising demand for LNG in Asia is forcing Europe to compete with higher supply premiums, whilst limited electricity storage capacity ensures that natural gas remains an essential back-up to support renewable energy sources, regardless of short-term price fluctuations.
This discrepancy stems from the different ways in which financial markets and political institutions perceive time. Markets operate on the basis of short-term liquidity horizons, typically ranging from a few months to three years, and price in expectations for that period. By contrast, states must plan with a horizon of decades in order to ensure energy sovereignty, security of supply and the stability of critical infrastructure.
For Greece, the risk arising from this time lag is particularly significant. Adopting the assumption that natural gas prices will fall because this is what the futures markets are pricing in, and the belief that renewables and the future development of electricity storage systems will resolve the problem in good time, constitute options carrying a heightened degree of strategic risk. National security cannot be based solely on financial forecasts or on optimistic scenarios regarding technological maturity.
The fundamental strategic error lies not in avoiding the purchase of expensive spot cargoes, but in the fact that the country has failed, particularly over the last decade, to systematically explore and develop its own hydrocarbon resources. The expectation that financial models and consultants’ forecasts would ensure cheaper imported energy in the future, combined with prolonged inaction regarding domestic production, has increased the exposure of the Greek economy and its critical infrastructure to the upheavals of an increasingly unstable geopolitical environment.
When it comes to national energy security, strategic resilience is not built on the curves of futures contracts, but on the diversification of supply sources, the availability of domestic resources and a state’s long-term capacity to retain control over its energy choices.
DefencePoint / Energy & Economy, Tuesday, September 22, 2026.