Natural gas prices around the world are skyrocketing, but prices in Europe make up the lion’s share. These currently match those of oil if it were sold for $ 410 a barrel. Four times the current prices
Gas benchmark prices in Europe rose 14% in just three days, reaching a new record, continuing the upward trend of the past few weeks, as demand for gas for electricity generation is high due to the waves heat and Russian pipeline supplies remain low as the EU scrambles to replenish gas storages ahead of winter, which will see energy and gas rationing, industrial shutdowns and paying very high prices for heating and electricity by families.
Europe is in the most precarious position, but natural gas prices are also rising in the United States and Asia. Electricity gas demand is high and production is flat in America, while major Asian buyers have returned to the LNG market to secure supplies for the winter. This product is a global commodity, which travels by ship, so the European increases have spread to the whole world.
The reference price for European gas is now $ 410 a barrel of crude oil, which highlights the “debilitating economic impact on the region,” said Ole Hansen, Head of Commodities Strategy at Saxo Bank.
Record gas prices are hitting industries in Germany and the rest of Europe, with companies announcing production halts or price cuts “until further notice” due to soaring energy costs. Industries have warned that reduced production and operations could lead to a collapse of supply and production chains. Governments are scrambling to secure enough gas for the winter, trying to balance between easing household costs and preventing an industrial collapse and a wave of energy company failures.
Due to the gas crisis and a heat wave that limits the supply and production of other fuel sources, electricity prices for the previous year continue to rise in Europe, with German energy prices , the European benchmark, which on Tuesday exceeded $ 508 (500 euros) per megawatt hour, a new record.
Despite faster-than-usual storage, Germany will have enough natural gas to cover only two and a half months of consumption this winter if Russia completely suspends supplies, Klaus Müller, president of the German energy regulator, told Bloomberg this week.
“The weight of high gas and oil prices will cause European economies to contract sharply next yearAmrita Sen, research director of Energy Aspects, told Bloomberg on Wednesday.
So far, the interruption of the works due to an accident at the American terminal of Freeport, the second in the USA, has limited the supply of American liquefied natural gas to the EU, but when this terminal reopens in October the gas flow will rise strongly . The effect will also be an increase in the US price, due to the greater scarcity of gas on the market.
Such high natural gas prices will have more effects:
- more investments in order to take advantage of the high prices;
- shift in demand for oil;
- shift of demand to alternative energy sources.