The era of cheap natural gas is over

Bloomberg article on Natural Gas, following the same Greenflation theme of increased demand and a limited supply response

https://www.bloomberg.com/news/articles/2021-08-06/the-era-of-cheap-natural-gas-ends-as-prices-surge-by-1-000

The era of cheap natural gas is over, giving way to an age of far more costly energy that will create ripple effects across the global economy.

With few other options, the world is expected to depend more on cleaner-burning gas as a replacement to coal to help achieve near-term green goals. But as producers curb investments into new supply amid calls from climate-conscious investors and governments, it is becoming apparent that expensive energy is here to stay.

European natural gas rates have surged more than 1,000% from a record low in May 2020 due to the pandemic, while Asian LNG rates have jumped about six-fold in the last year. Even prices in the U.S., where the shale revolution has significantly boosted production of the fuel, have rallied to the highest level for this time of year in a decade.

While there are several one-off factors that have pushed gas prices higher, such as supply disruptions, the global economic rebound and a lull in new LNG export plants, there is a growing consensus that the world is facing a structural shift, driven by the energy transition.

Demand isn’t showing any signs of slowing down.

Utilities in Europe are switching to the cleaner-burning gas due to sky-high carbon prices, South and Southeast Asian governments are planning dozens of new gas-fired plants to meet greater electricity needs, and China is poised to depend more on gas than ever as it seeks to peak coal consumption.

Countries championed gas as a way to quickly reduce their carbon footprint. The shift to natural gas can be done relatively quickly with limited deployment of capital, while having a significant impact on lowering emissions, according to James Taverner, an analyst at IHS Markit. Natural gas is the cleanest burning fossil fuel, and emits almost 50% less CO2 than coal. Meanwhile, non-fossil-fuel alternatives such as wind and solar are at a relatively early stage in the energy transition.

Mark Gyetvay, the deputy chief executive officer of Russian LNG exporter Novatek PJSC, warns that the green movement could disrupt the delivery of adequate and affordable supply to consumers.

“The lack of capital investments in future natural gas projects does not lead us to an energy transition, but instead leads us down an inevitable path toward an energy crisis,” said Gyetvay.