Has Europe’s long-awaited energy crisis been put on hold? From falling gas prices to unusually warm temperatures, Europe’s natural gas demand is declining at a remarkable pace heading into the winter season.
In the first half of 2022, European natural gas prices surged due to uncertainty, buying frenzy and cooler than normal temperatures. However, multiple international benchmarks have fallen by double digits since the summer. By comparison, in the United States, natural gas prices have risen by about 100% so far on the New York Mercantile Exchange due to increased demand.
Historically, the main drivers have been cases of demand disruption, where the demand for goods and services continues to decline in response to rising prices, and out-of-season weather conditions.
according to data tracker bruegel, European Union natural gas consumption fell by 10% in the first 10 months of 2022. Some of the largest markets recorded significant declines in natural gas use, including Denmark (-18%), France (-6%), Germany (-13%), the Netherlands (-24%) and Sweden. (-17%).
“While most of the decline was due to industry during the summer months, there was a significant drop in household demand in October, which was largely influenced by warmer-than-normal weather,” Bruegel wrote. ing.
Data from Engie SA’s market analysis platform EnergyScan highlight Western Europe’s total gas demand fell 22% year-on-year in October, with more households turning off their heating. However, this drop was offset by a 14% increase in consumption in the electricity sector.
Does this mean that a potential European energy crisis has been cancelled? Keisuke Sadamori, Director of Energy Markets and Security at the International Energy Agency (IEA), warns otherwise. increase.
“Russian aggression in Ukraine and a sharp decline in natural gas supplies to Europe are doing great harm to consumers, businesses and the economy as a whole, not only in Europe, but also in emerging and developing countries. report“The outlook for the gas market remains cloudy due to Russia’s reckless and unpredictable actions that have shattered its reputation as a reliable supplier. It shows that we are still.”
World consumption trends
Looking ahead, IEA forecasts for Q4 gas market report Global natural gas consumption is projected to grow by an average of 0.8% annually from 2022 to 2025, reaching 4.24 trillion cubic meters.
But while all the focus is on Europe becoming less dependent on energy from Russia, the IEA also sounded alarm bells about other developing markets in the Asia-Pacific, Middle East and Africa regions. Demand growth in these sectors remains strong in recent years as governments replace high-emission fossil fuels with natural gas. Market experts worry that their transition could come under threat, especially if some of the world’s largest energy producers further concentrate their exports to Europe.
“In practice, the impact of gas shortages is likely to be uneven, with wealthier countries reprioritizing by increasing investment in energy costs, transport and increasing the number of gas terminals. , we can make austerity choices,” said Irina Tsukerman. Vice Chairman of the Oil and Gas Commission of the American Bar Association told the Epoch Times.
Some countries, such as Bangladesh and Pakistan, that have started energy overhauls have stopped buying because of rising energy prices, he added.
“However, poorer countries are inherently subject to higher prices and geographic constraints, and are likely to suffer short- and long-term problems such as supply chain disruptions, food shortages, power shortages and recessions.” She added. “As long as wealthy countries can source short-term supplies from a variety of sources, the structural process can continue.”
As with what happened in Sri Lanka, political turmoil quickly follows when fuel supplies run out.
But Kunal Sawney, CEO of investment research firm Karcain Group, has suggested that global supplies may depend on wars in Russia and Ukraine.But for now. , he notes, European countries have successfully “outpaced the developing world in their search for expensive natural gas.”
“This creates an imbalance as higher import prices and weaker currencies force developing countries to rely on dirtier forms of fuel,” Sawney told the Epoch Times. If the U.S. continues to restrict natural gas flows to Europe, there could be long-term consequences.The current situation casts uncertainty on the long-term outlook for the natural gas sector, especially for developing countries. increase.”
If poorer countries can’t access or can’t afford natural gas, they may fall back to other fuels to keep the lights on, experts warn.
CAN US HELP?
Meanwhile, the United States is trying to keep up with domestic and international demand. Exports of liquefied natural gas (LNG) this year are expected to average 11.01 billion cubic feet per day (bcf/day), or 12.34 billion cubic feet per day.Energy Information Administration (EIA) Short Term Energy Outlook (STEO) indicates that dry natural gas production averages 100 billion cubic feet per day.
The United States is accelerating its LNG exports to its major market, Europe. The United States has exported more LNG abroad in the first six months of 2022 than it did last year. Sixty percent of her US LNG cargoes delivered in August landed in Europe.
The United States is currently under construction Three export projects to expand combined LNG export capacity to 5.7 billion cubic feet per day by 2025.
It should also be noted that the Freeport LNG facility, which was closed in June due to an explosion, is poised to resume production later next month.
“Additionally, January is expected to produce 2 billion cubic feet per day, with both docks going into full production at 2.1 bcf/day in March.” However, Freeport’s capacity is just under 20% of total LNG capacity in the U.S. The implication of the shutdown is that more natural gas will stay domestic, pushing U.S. natural gas prices higher than elsewhere. to be equally degraded by all of
As part of an effort to capitalize on rising prices and growing global demand, the American natural gas sector is booming. At the same time, industry leaders are noting growth capped by rising cost pressures and supply chain delays. Dallas Federal Reserve Bank.
“The government’s lack of understanding of the oil and gas investment cycle continues to lead to inconsistent energy policies and contributes to rising energy costs. It reduces investment in infrastructure,” an oilfield services company executive said in a survey. “We are in an energy death spiral that leads to rising highs and falling lows.
Europe’s LNG imports will increase by about 60 billion cubic meters this year, more than double the additional LNG export capacity. Current trends could put significant pressure on international LNG trading in 2023 and beyond.
follow
Andrew Moran has been writing about business, economics and finance for over a decade. He is the author of “The War on Cash”.