The era of cheap natural gas has ended and has been replaced by a much more costly energy era that will have choppy effects on the global economy.
Natural gas, used to generate electricity and heat homes, has been plentiful and cheap during the boom in supply from the US to Australia for much of the past decade. It has come to a standstill this year as demand has largely outpaced new supply. European gas rates hit a record high this week, while deliveries of liquefied fuel to Asia are close to an all-time high for this time of year.
Along with a few other options, is expected to make the world more dependent on cleaner-burning gas instead of coal to help meet short-term green targets. But as producers clamp down on investment in new supplies at the urging of climate-conscious investors and governments, it turns out that expensive energy is permanent.
"No matter how you look at it, Gas will be the transit fuel for decades to come, as the major economies are determined to meet their carbon emission targets," said Chris Weafer, Chief Executive of Moscow-based Macro-Advisory Ltd. gas is more likely to remain high in the medium term and rise in the longer term.”
According to the International Energy Agency, by 2024 demand is expected to rise 7% from pre-Covid-19 levels. Looking further ahead, McKinsey & Co. the appetite for liquefied natural gas is expected to grow by 3.4% a year by 2035, outpacing other fossil fuels, according to an analysis by.
Rising natural gas prices mean it will be more costly to power factories or produce petrochemicals, shaking up every corner of the global economy and feeding inflation fears. For consumers, it will bring higher monthly energy and gas bills. Running a washing machine, taking a hot shower and cooking dinner will cost more.
It is particularly bad news for poorer countries such as Pakistan and Bangladesh, which are reworking all their energy policies on the assumption that the price of fuel will be lower for longer.
European natural gas rates have risen more than 1,000% from a record low in May 2020 due to the outbreak, while Asian LNG rates have risen nearly sixfold in the past year. Even prices in the US, where the rock gas revolution has dramatically increased fuel production, have risen to their highest level for this time in a decade.