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Increased reliance on natural gas creates supply crunch, soaring prices

September 10, 2021

The Fuse: 

Natural gas prices are soaring around the world in what has become something of a global supply crunch.

Prices in the U.S. recently hit a 7-year high, natural gas prices in Europe are soaring, and LNG prices in Asia have hit a record high. Higher natural gas prices are forcing up the cost of electricity, and some analysts warn of inflation. But while the supply picture is rocky in the short run, high prices and volatility only undermine the argument for gas in the energy mix over the long run.

U.S. nymex prices shot up close to $5/MMBtu this week, a price not seen since the polar vortex of 2014. Prices have now increased by nearly 100 percent this year. Bloomberg notes that traders are placing a premium on futures contracts for March deliveries, which is not coincidentally at the end of the winter season, perhaps when the market could be at its tightest.

The outages of 77 percent of the U.S. Gulf of Mexico natural gas supply due to Hurricane Ida is not helping matters. In the American West, extreme drought has undercut hydropower generation, forcing a greater reliance on gas.

[ Nick Cunningham  ] 

More:Natural Gas Prices Soar Worldwide in a Mark of Extreme Volatility

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