Natural gas prices experience a historic increase – Energetika – PRAVDA.sk

The sharp rise in global gas prices is a risk to the economic recovery.

Natural gas prices are experiencing historic growth, which is bad news for companies from a variety of industries around the world. Prices are already at record seasonal levels in most important markets and appear to continue to rise, threatening the recovery of the economies from the corona crisis.

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According to Bloomberg’s analysis, the coming winter may painfully highlight the vital and ubiquitous nature of gas for the economy. High prices can affect household consumption and thus reduce their incomes, which makes it difficult for central bankers to decide on monetary policies.

A possible shortage of supply can cause problems in industry or even power outages in developing countries, which can lead to social unrest.

The basis of the economy

“Energy is at the heart of the economy,” said Bruce Robertson, an analyst at the Institute for Energy Economics and Financial Analysis (IEEFA). According to him, high energy prices will be passed through supply chains and may jeopardize the nascent recovery.

Energy prices are rising around the world. It supports their revival of demand for corona crisis. Oil prices have risen for a long time since the end of 2020 and reached multi-year highs at the end of July.

The more serious rise in gas prices in the northern hemisphere began in early summer, when it became increasingly clear that supplies to Europe were insufficient to replenish storage tanks emptied during the winter. Russia, Europe’s largest supplier, is restricting supplies for a number of reasons, such as growing domestic demand, disruption of production, and an agreement on less transit through Ukraine.

“Throughout the summer, we are in a slump when it comes to replenishing stocks,” said Alfred Stern, head of the Austrian company OMV. According to him, consumers in Europe are now at the mercy of the weather and the development of prices “will depend on how cold the winter is”.

However, the problem is not limited to Europe. Although supply restrictions from Russia have not directly affected Asian consumers, they are still competing with them for liquefied gas supplies in Europe, forcing them to pay higher prices to secure supplies.

“High prices are a problem for Europe today,” said the head of the Italian power group Enel. “But they can also be a problem for Asia,” he added.

The liquefied gas (LNG) market connects Europe, Asia and the USA, and higher prices have already been transferred to the US market by stimulating export growth. Gas futures on the New York Stock Exchange jumped 80% this year, reaching the highest level since 2018, but still significantly lower than in other global markets.

“The European and American markets are in a similar situation before the heating season,” said Energy Fects gas analyst Nina Fahy. “We can potentially face concerns about the adequacy of stocks in the event of an unconventionally cold winter, given the high level of LNG exports we expect.”

Consequences of rising prices

The sharp rise in gas prices is beginning to have economic consequences around the world. For example, Europe’s largest sugar producer, the French company Tereos, warned in August that gas prices were affecting sugar processing in Europe as they skyrocketed.

Rising energy prices are increasing inflationary pressures and will be passed on to consumers through other prices, said Pascal Leroy, vice president of the French food company Roquette Freres.

In China, the world’s largest importer of gas, production is limited by high ceramics producers, for example. The sharp rise in electricity costs is disrupting the production of the Pakistani steelworks Mughal Steels.

JPMorgan Chase & Co. Bank It said this week that its global purchasing managers’ index for the manufacturing sector had fallen to a 6-month low, although it was still signaling expansion.