Energy News Beat Publishers Note (ENB): Russia has held Europe hostage in the past and is doing it again with the Nordstream 1 down, and Nordstream 2 just starting operation. Politics sometimes just makes you want to shake your head and leave the office early. And from Geo-Political Futures, “Energy inflation. Concerns are growing in Europe about rising energy prices. In Germany, the price of electricity has doubled since March 2020. Gasoline prices have also risen significantly due to a carbon tax. In Europe, the price of natural gas is now at a 13-year high, in part due to supply shortages following a cold, long winter and Gazprom’s decision not to increase gas transit through Ukraine while other pipelines are being repaired.”
Energy inflation is gathering pace in Europe, with the price of everything from gas to electricity surging to records, fueling concerns about costs to consumers as the world emerges from the global pandemic.
European natural gas and power prices climbed to an all-time high on Thursday, as did the cost of pollution permits. Energy demand is rebounding just as Europe plans to expand and impose tougher limits on emitters later this month, a move that’s helping boost energy costs in the region.
Energy prices are soaring from the U.S. to Asia as economies recover and more people get vaccinated. Consumers are set to face hefty bills this coming winter, with countries like the U.K. raising the cap on how much utilities can charge consumers and Spain moving to cut energy taxes.
Europe is facing a severe gas supply crunch, with prices jumping almost 90% this year after a colder- and longer-than-usual winter left storage sites depleted. And supply isn’t rising fast enough, with Russia flowing less gas to Europe through Ukraine — a key transit route — and Asia scooping up cargoes of the liquefied fuel as intense heat boosts demand for cooling.
“European gas prices there have surged in recent weeks amid supply constraints, with Russia holding back exports to Western Europe despite strong demand,” said Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. “The region is still recovering from the harsh winter’s drain on inventories.”
With gas so expensive, Europe needs to use more coal to keep the lights on as output from renewable sources remains low. That means that if the price of carbon gains, gas had to follow suit to ensure coal is the cheapest feedstock to make electricity, said Bjarne Schieldrop, chief commodities analyst at SEB AB.
“European gas and coal prices are driven by low renewable output that makes fossil fuels more attractive,” Swedish utility Bixia said in emailed report. “It is more attractive to generate coal than gas power in some cases.”
Power prices in Spain have also surged, but the spikes are a “temporary situation,” said Jose Bogas, chief executive officer of Endesa SA.
Gas inventories in Europe are already at the lowest level in more than a decade for this time of year. To make matters worse, Russia on Tuesday opted against sending additional gas to Europe through Ukraine for a third consecutive month, snubbing one of two monthly auctions.
“July was seen as the one month they would book added capacity given maintenance on all of their other main pipes,” said Trevor Sikorski, head of natural gas and energy transition at consultants Energy Aspects in London.
The Nord Stream 1 pipeline linking Russia directly to Germany undergoes maintenance for 10 days in July, while the Yamal-Europe link will be shut down from July 6-10.
The European Commission is planning the biggest overhaul of the world’s largest carbon market for later this month. The reform, due to be unveiled on July 14, is set to increase the rate at which the emissions caps shrink each year and to toughen the rules to get carbon allowances for free.
Dutch gas futures on the Title Transfer Facility hub rose as much as 7.3% to 37.15 euros a megawatt-hour, while German power for 2022 climbed as much as 3.6% to a record 74.80 euros per megawatt-hours on the EEX exchange.
The price of coal for 2022 delivery in Europe added as much as 1.8% to $88.75 a metric ton, the highest for a front-year contract since December 2018. The benchmark carbon-contract surged as much as 4% to a record of 58.64 euros a ton.
Supplies are also tight as Norway is undergoing heavy maintenance after pandemic-induced delays and the cost of polluting in Europe surged to a record ahead of market reforms this month. That’s making gas more expensive. Asia is also buying up cargoes of liquefied natural gas.
Stuart Turley is President and CEO of Sandstone Group, a top energy data, and finance consultancy working with companies all throughout the energy value chain. Sandstone helps both small and large-cap energy companies to develop customized applications and manage data workflows/integration throughout the entire business. With experience implementing enterprise networks, supercomputers, and cellular tower solutions, Sandstone has become a trusted source and advisor. He is also the Executive Publisher of www.energynewsbeat.com, the best source for 24/7 energy news coverage, and is the Co-Host of the energy news video and Podcast Energy News Beat. Energy should be used to elevate humanity out of poverty. Let's use all forms of energy with the least impact on the environment while being sustainable without printing money. Stu is also a co-host on the 3 Podcasters Walk into A Bar podcast with David Blackmon, and Rey Trevino.
Stuart is guided by over 30 years of business management experience, having successfully built and help sell multiple small and medium businesses while consulting for numerous Fortune 500 companies. He holds a B.A in Business Administration from Oklahoma State and an MBA from Oklahoma City University.
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