Natural gas prices are undergoing a historic surge, and it’s bad news for everyone from ceramic makers in China to customers of patisseries in Paris. The cost of the fuel is already at record seasonal highs in most major markets and looks likely to rise further, threatening to dent the recovery from the Covid-19 pandemic. The coming winter may give the world a painful lesson in just how pervasive and vital gas has become for the economy. Unaffordable prices could crimp households’ spending and erode their wages through inflation, giving central bankers some difficult policy choices. Worse still, actual supply shortages could idle swathes of industry, or even trigger blackouts in developing countries, potentially causing social unrest.“Energy lies at the base of an economy,” said Bruce Robertson, an analyst at the Institute for Energy Economics and Financial Analysis. “High energy prices reverberate through the supply chain” and could dent the nascent recovery, he said. Energy costs are rising around the world as the recovery in demand from the worst of the Covid-19 lockdowns collides with supply constraints. Oil has already undergone a long rally that started in late 2020 and ended at multi-year highs above $75 a barrel in July. Gas began to rise in earnest at the start of summer in the northern hemisphere, when it became increasingly clear that there wasn’t enough supply in Europe to allow the usual refilling of storage sites depleted in winter. The continent’s largest supplier, Russia, has been limiting pipeline exports due for a number of reasons including high domestic demand, output disruptions and an agreement to transit less of the fuel through Ukraine.“We’ve been running behind the storage delay all summer,” said Alfred Stern, chief executive officer of Austrian oil and gas producer OMV AG. Consumers in Europe are now at the mercy of the weather and the trajectory of prices “will now depend on how cold this winter is.”In Europe, the price of gas has since surpassed oil, but the problem isn’t contained within the region. While the Russian supply constraints don’t directly affect consumers in Asia, they must still compete with Europe for seaborne shipments of liquefied natural gas, forcing them to pay higher prices to secure deliveries.“High gas prices today are a problem for Europe,” Francesco Starace, the CEO of Italian utility Enel SpA, said in an interview on Bloomberg TV on Friday. “They might be a problem for Asia too.”The LNG market is what connects Europe, Asia and the U. S., and high prices there feed through to the domestic American market by stimulating greater exports of the super-chilled fuel. Natural gas futures in New York have risen 80% this year to highest since 2018, although they are still far lower than in the other major global markets.“The European market and the American market are in a similar place heading into the heating season,” said Nina Fahy, a natural gas analyst at Energy Aspects Ltd. in New York.
All data is taken from the source: http://bloomberg.com
Article Link: https://www.bloomberg.com/news/articles/2021-09-04/global-gas-price-surge-threatens-to-dent-the-economic-recovery?srnd=premium
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