As winter approaches, Asian and European natural gas buyers are competing for any available supplies and driving the price continually higher – to over $30/MMbtu in October 2021.
At those prices, natural gas (outside the United States) is the most expensive fossil fuel on a heat content basis. Exceeding the heat content equivalent price of motor gasoline, both now and back when crude oil prices were regularly near $100/b (2011-14).
These high prices have economic consequences for households in the form of higher electricity prices and home heating costs, but also for many industries that use natural gas as a feedstock to produce other goods such as fertilizer for agriculture, or carbon dioxide for refrigeration. Shortages of these products further complicate global supply chains that are still suffering from issues related to the pandemic.
Joseph McMonigle, Secretary General of the International Energy Forum, said: "The current energy market situation affects a still uneven and fragile global economic recovery. Sustained high prices and volatility may reset inflation expectations and will hit energy import-dependent economies and low-income groups the hardest."
In the short-term, high natural gas prices encourage fuel switching – not energy transitioning, hindering progress towards energy access and climate goals. Developing nations unable to afford the high price of imported natural gas will resort to more carbon intensive alternatives for heat and electricity generation such as fuel oil and coal. Prices for both fuel oil and coal in Asian markets have risen as many countries seek to secure supplies ahead of winter.
Mr McMonigle said: "Emerging economies across Asia, Africa and Latin America have chosen natural gas as their fuel of choice for the energy transition, because it is cleaner than coal or oil, it is affordable and available, and it complements renewables to provide a reliable electricity baseload. We call on policymakers to encourage greater investment in natural gas, and to refrain from raising barriers to gas trade, to ensure that transitions occur as quickly and smoothly as possible."