Shortage of Cargo Ships Impacting Energy Prices


The European energy crisis and the consequent increase in demand for cargo ships carrying fuel are creating upward pressure on fuel costs.

Following Russia’s invasion of Ukraine, the European Union (EU) has imposed sanctions on the Kremlin. In response, Russia began cutting gas supplies to the region, triggering an energy race on the continent. To replace Russian supplies, Europe now has no choice but to import oil and gas from elsewhere.

As the ships carry fuel from far away locations to Europe, these ships will be occupied for longer periods and will not return to service as usual. the house told bloomberg.

For example, the cost of shipping a cargo of naphtha petrochemical feedstock from the Middle East to Japan doubled in March. In the US, shipments of oil cargo to China have reached their highest level since 2020.

The shortage of ships is becoming more severe as European utility companies berth cargoes of liquefied natural gas (LNG) on board. Shipping terminals in the region are operating at full capacity, preventing these utility companies from importing goods into onshore storage.

As a result, companies are forced to store their supplies offshore on ships. This is also called “floating storage”. This practice contributes to the shortage of ships.

Oystein Kalleklev, Chief Executive Officer of shipowner Flex LNG Management AS, said: bloomberg.

“However, the LNG gas carrier market has been mostly sold out for the winter, so traders are looking to utilize the ships in their existing portfolios.”

Europe’s energy and social crisis

According to Ed Morse, global head of commodities research at Citigroup, Europe’s energy crisis could last more than three years.

“European prices will return to early 2021 levels sometime between 2025 and 2027,” he said in an interview with Bloomberg.

At a press conference in late August, Shell CEO Ben van Baden said the energy crisis facing Europe could last for several winters, requiring energy rationing to manage the situation. I warned you of the possibility.

Energy prices in Germany, one of Europe’s largest economies, crossed the €1,000 per MWh threshold for the first time last month.

Limited power and energy supplies also pose a social threat to Europe. Kristalina Georgieva, Managing Director of the International Monetary Fund, said at a recent event in Washington, “If Mother Nature decides not to cooperate and winters are indeed severe, it could lead to social unrest. There is.”

Naveen Aslapury

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Naveen Athrappully is a news reporter covering business and world events for The Epoch Times.