- Another crucial global market has gone from glut to scarcity in fierce haste.
- The deficiency has many causes.
Natural gas market has gone down due to its shortages, reports MCU Times.
Global Gas Market
Another crucial global market has gone from glut to scarcity in fierce haste. Last September in Europe, it cost € 119 ($ 139) to buy enough gas to heat the average home for a year, and the continent’s gas reserves were full. Today it costs 738 € and stocks are scarce. Even America, which has an abundance of shale gas, has seen prices more than double – albeit from a much lower level – and could see further increases if the winter is cold.
What could be the causes?
The deficiency has many causes. A cold European spring and a hot Asian summer increased energy needs. Reconstruction of industrial production has lifted the global appetite for liquefied natural gas (LNG). Russia has brought less gas to European warehouses. The Hawks suspect it is trying to intimidate the market and ensure that its new Nord Stream 2 pipeline is approved. But it has also faced disruptions, including a fire at a processing plant in Siberia.
Gas has stopped gaps in electricity production from other sources. The wind did not blow much in Europe this summer, while drought disrupted hydropower production. The rising cost of permits is needed to emit carbon in ME has made cool expensive. So there is little alternative to burning gas for electricity as well as for heating homes.
Economies’ Actions
While the world economy’s other bottlenecks — for container ships and microchips — have released a boom in capital spending, investment in fossil fuels is declining in the long run. American shale can only help so much, for gas markets are incompletely connected via LNG. High prices when they hit will mainly serve to ration limited supply. But it requires large price movements to dampen demand. If the coming months are cool, Europe’s energy may have to become extremely expensive to persuade businesses and households to spend less.
Sorting this out requires an accurate diagnosis of what has gone wrong. Governments have not taken sufficient account of the intermission of renewable energy. The world has too little nuclear power — a low-carbon energy source that is always on. Interventions and subsidies for gas will only make things worse. Expensive energy makes voters angry and hurts the poor. But subsidizing energy in a squeeze, as Italy does, or limiting prices, as Britain does, will exacerbate shortages and make politicians’ commitment to the green look empty. Governments should use the welfare system to support household incomes if they have to, while helping energy markets to function efficiently.
What could be done for development?
The long-term challenge is to even out volatility while continuing the shift to renewable energy. Finally, cheap battery storage can solve the intermittency problem; right now, more gas storage would also help. Meanwhile, adjustments to the market can improve things.
In the UK, many small energy suppliers, e.g. Offering consumers with one-year fixed-price deals, but buying energy at liquid rates will soon fail. Getting companies selling at fixed interest rates to hedge against wholesale price increases should encourage more physical storage of gas. Another idea is to invest more in connecting networks (a connection between Britain and France recently failed) and in LNG infrastructure so that arbitrage trades can even out differences in the global energy supply.
Dirty energy sources should be expensive. But without reliable alternatives, price increases increase inflation, lower living standards and make environmentalism unpopular. If governments do not handle the energy transition more carefully, then today’s crisis is the first of many that threaten the crucial step towards a stable climate.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source : MCU Times
