Natural gas prices have soared by almost 500% in 2021 and with another winter just around the corner gas is trading at near-record values. While European countries attempt to outbid one another for supplies from major exporters it's inevitable that utilities will turn back to coal to provide heat for its residents and power for its dying economy, but this will not be enough. The effects of Europe's catastrophic policymaking are about to escalate to another level.
"Nations are more reliant than ever on natural gas to heat homes and power industries amid efforts to quit coal and increase the use of cleaner energy sources. But there isn’t enough gas to fuel the post-pandemic recovery and refill depleted stocks before the cold months," Bloomberg's Stephen Stapczynski noted.1
With natural gas inventories in Europe at historically low levels for this time of year, the crunch will get a lot worse when temperatures drop.
The spike in prices has already forced some fertilizer producers in Europe to reduce output, with more expected to follow, threatening to increase costs for farmers and potentially adding to global food inflation, Stapczynski said.
While governments are now hoping that nature will come to their aid with mild winter, making the effects of their catastrophic decisions less severe, that scenario is almost impossible to happen. It's much more likely we'll see another brutally cold winter across the hemisphere, with lots of snow and extremely cold periods in regions where we least expect them.
"The next three to four months may lead to unexpected consequences for all industries with a particular hit being taken by those that are energy-intensive," said Slava Kiryushin, global head of energy at DWF, an international provider of legal and business services.2
"If the winter is actually cold, my concern is we will not have enough gas for use for heating in parts of Europe," Amos Hochstein, the U.S. State Department’s senior adviser for energy security, told Bloomberg. For some countries, 'it won’t only be a recessionary value, it will affect the ability to actually provide gas for heating. It touches everybody’s lives.'
Keep in mind that summers are already shorter and winters longer, putting an additional strain on energy suppliers.
It's utterly embarrassing for the policymakers, but the situation brings back coal to the European table. However, coal alone will not solve the crisis as exports of the commodity from Australia, South Africa, and Colombia remain hampered by the COVID measures and supply chain challenges, compounding the effect of low Russian supply.2
"The crisis in Europe presages trouble for the rest of the planet as the continent’s energy shortage has governments warning of blackouts and factories being forced to shut," Stapczynski said, adding that the power crisis could exacerbate shutdowns if authorities divert gas to light and heat households.
"This winter, the world is likely to learn how much the global economy depends on natural gas," Stapczynski concludes.
As always, it's the people who will suffer the most. When you combine everything that's happening around the world now, it's very likely the winter of 2021/22 will push the world further into chaos.
1 Europe’s Energy Crisis Is Coming for the Rest of the World, Too – Bloomberg Businessweek
2 Europe's energy crisis: A switch back to coal is on the cards – The National News
Featured image credit: Marco Verch (Creative Commons 2.0)
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