An Expanding Global Energy Crisis
Most economies around the world are facing a deepening energy crisis—due to global supply disruptions, high energy prices, geopolitical turmoil, and an as-yet-unrealized energy transition away from carbon-intensive sources.
Published: July 7, 2022
Updated: July 27, 2022
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The immediate supply shock caused by Russia's invasion of Ukraine was felt in power, petrol and supermarket prices across Europe -- and now, as the war enters its fifth month, sanctions and financing restrictions may trigger supply-side changes that could affect natural gas, crude, diesel and grains for years to come.
Russia's commodity exports fell as a result of Western sanctions, purchasers self-sanctioning and security issues on the supply routes, and Europe's imports are set to decline further as phased sanctions come fully into effect, mostly by early 2023.
Russian countersanctions include a rule stipulating that European consumers should pay for Russian gas via a ruble-payment mechanism. Gazprom has cut off several countries that have refused to comply.
As the conflict continues, the likelihood grows of new measures targeting other areas of commodity trading, and Russia's response could include further attempts to change payment terms.
Crude Prices in Europe
Investment Needed In LNG Sector To Respond To Russian Energy Crisis: G7
More LNG sector investment is needed to respond to the current energy crisis and to aid efforts to phase out Russian gas dependency, G7 leaders have agreed.
READ THE ARTICLEG7 Cautiously Backs Russian Oil Price Cap, Pledges To Boost Energy Security, Stability
G7 leaders on June 28 tentatively backed plans for an international cap on Russian oil prices in response to the Ukraine war while pledging to boost energy security and try to rein in price rises, alongside meeting climate goals.
READ THE ARTICLEEnergy Transition Focuses On Security, Affordability Amid High Energy Prices: Execs
The recent increase in oil, natural gas and electricity prices in many markets globally has helped rebalance the energy transition conversation to focus on affordability, reliability and decarbonization which can be done with hybridization of power generation and industrial technologies, executives said June 14.
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In a complicated world where one event triggers challenges for seemingly unrelated industries, the S&P Global network of over 750 global experts can provide you a 360-degree view of key trends. Get in-depth insights into the intersection of topics such as economics, shipping, automotive, commodities trading, oil and gas, financials, sustainability and more.
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Europe's gas market enters Q3 2022 on the edge of a precipice, with curtailed Russian supplies prompting emergency plans, a first step towards rationing.
In the power sector, efforts to reduce gas-for-power demand have been compromised by record-low nuclear availability and sub-par hydro resource.
As a result, gas and power prices across Europe are more than four times higher year on year, while EUA carbon prices have climbed 47% over the same period.
European Gas, Power on Emergency Footing Going Into Q3 2022
Europe's New Trade Flows for Coal Shaping Up as Import Ban on Russia Looms
With the flow of Russian coal to Europe coming to a final end, buyers jostling for alternatives are increasingly in favor of tapping non-traditional markets, a development many believe, for better, will likely lead to the creation of new trade flows for the fuel.
Read the ArticleEU Energy Ministers Adopt 15% Gas Savings Regulation with Exemptions
EU energy ministers have agreed to voluntary gas demand reductions of 15% this winter but with potential exemptions for member states if the cuts are made obligatory under emergency conditions, the Czech presidency said July 26.
Read the ArticleListen: Can Europe Avert an Energy Crisis?
Listen and SubscribeNext Few Months to be 'Critical' for European Gas Preparedness: IEA's Birol
The next few months will be "critical" for Europe to build up sufficient gas stocks to make it through the upcoming winter given uncertainty over Russian gas supplies, the head of the International Energy Agency said July 18.
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Do you need to understand the market value of LNG in regional and global markets? What is the value of freight rates and shipping costs between export and import locations? Or how supply and demand fundamentals are impacting the price of LNG? S&P Global Platts delivers the data and prices you need to make competitive decisions.
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Asia-Pacific economies are facing an energy crisis that threatens to worsen in coming months and reach historic proportions if the Russia-Ukraine war continues. The magnitude of the crisis varies in different countries but broader trends are identical – high fuel prices, supply disruptions, domestic energy shortages, blackouts, involuntary demand destruction, calculated energy rationing, depleting forex reserves and market volatility.
Prices
Asian spot LNG prices for the summer of 2022 are at their highest level for this time of the year. The Platts JKM for August was assessed at $36.888/MMBtu June 24, S&P Global Commodity Insights data showed.
Asia-Pacific Economies Grapple With Ballooning Energy Crisis
Fuel Shortages Hit Nearly a Quarter of Pakistan's Operational Power Plants
Nearly a quarter of Pakistan's operational power generation capacity of 28 GW has been shuttered due to fuel shortages and adverse weather conditions, with most of the outages at gas-fired power plants, according to market sources and government officials.
Read the ArticleIndia May Fall Short of 2030 Target to Raise Natural Gas Share, Says IGX CEO
The Indian government's goal to increase the share of natural gas in the country's total energy mix to 15% by 2030, from 6.7% currently, may fall short of that target to reach a lower double-digit growth as recent events—he global pandemic and the Russia-Ukraine war—have dampened such targets somewhat, IGX CEO and Managing Director Rajesh Mediratta told S&P Global Commodity Insights in an interview.
Read the ArticleJapan to Have Up to Nine Nuclear Reactors Operational by Winter: PM
Japanese Prime Minister Fumio Kishida said July 14 he wanted up to nine nuclear reactors to be operational by this winter and secure capacity from 10 additional thermal power plants to ensure sufficient generating capacity, given the severe supply and demand outlook.
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Platts Market Data – Energy Transition provides access to the full breadth and depth of our energy transition market data, including contract price assessments.
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The recent natural gas price increase in the United States is inevitably spreading to Mexico's gas and power markets. A lower-than-expected supply response in the United States, combined with strong natural gas demand for both domestic and export markets, has led Henry Hub prices to nearly double year to date. Mexico is currently importing about 65% of its total gas needs from the United States and has limited resilience to the price fluctuation in its northern neighbor. This situation was evidenced in February 2021 when storm Uri severely disrupted gas supply in Texas and prices spiked.
The national natural gas price index (IPGN) in Mexico broke the $6/MMBtu mark in April 2022 and might be close to $8/MMBtu in May based on price increases in the main US reference hubs. Most importantly, the US gas market is expected to continue operating in a tight situation through 2023 resulting in an extended period of high gas price benchmarks for Mexico.
Historical Henry Hub and Power Prices in Mexico’s National Interconnected System (SIN)
Ernest Moniz on Climate Change, Carbon Pricing and the Current Energy Crisis
Extreme weather will eventually force the U.S. to put a price on carbon. Despite politics, climate change solutions are being worked on. Carbon removals are essential to net-zero goals.
Read the ArticleU.S. Says G7 'Very Close' To Deciding On Global Price Cap For Russian Oil
The Group of Seven nations, a bloc of the world's leading industrial states, are edging closer to formulating a mechanism which will cap the price of Russian oil as they look to squeeze Moscow's oil and gas revenues, according to a June 27 briefing by the U.S. government.
Read the ArticleRussian Gas Supply Cuts 'Underscore' Importance Of U.S.-EU Action On Energy
The cut in Russian gas deliveries to a number of EU member states "underscores" the importance of collaboration between the U.S. and the European Commission on ending reliance on Russian energy, U.S. President Joe Biden and EC President Ursula von der Leyen said June 27.
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As curtailed Russian gas supplies and record-low nuclear availability raise the specter of potential power blackouts in Europe, countries are allowing more coal-fired power generation, setting energy price caps and triggering emergency gas plans.
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Citing technical faults, safety concerns, and sanctions, Russia's technical regulator reduced the operational capacity of the Nord Stream pipeline by 60% on 16 June. This has reduced pipeline deliveries of Russian gas to the EU by about 35% to unprecedented low levels.
Saying what many were thinking, German minister of economy and climate Robert Habeck has called the technical issues "a pretext" and accused Russia of seeking to drive up prices and destabilize the gas market.
Laurent Ruseckas is a specialist on gas markets, gas midstream, politics and policy in Europe and Eurasia, S&P Global Commodity Insights.
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