Since Russia invaded Ukraine on February 24, European countries have tried to end their dependence on Moscow’s oil and gas by trying to find new suppliers elsewhere. Some of these suppliers include Qatar, which has signed a gas agreement with Germany, which is heavily dependent on Russian gas, and Israel, which more than a month ago signed an agreement with the EU to supply liquefied natural gas (LNG) with the help of Egypt. to pump up. †
However, a new report has warned that Europe’s rapid dumping of Russian gas and seeking other suppliers has led to an “exceptionally tight global market” where rich industrialized nations are buying up LNG stocks, raising supply risks in emerging economies.
The report from the International Energy Agency reads: “The record high European gas prices have turned the continent into a premium market for LNG, with deliveries from other regions, leading to supply tensions and destruction of demand in several markets.
“Europe’s LNG needs are expected to exceed supply capacity expansions by 2022 and represent more than 60 percent of the net growth of global LNG trade through 2025.”
IEA chief Fatih Birol said at a global energy forum in Sydney earlier this week: “The world has never witnessed such a major energy crisis in terms of depth and complexity.”
“Maybe we haven’t seen the worst yet † this affects the whole world.
“This winter in Europe will be very, very difficult. This is a major concern, and this could have serious consequences for the global economy.”
While global demand for natural gas has risen, the supply of gas has not grown enough to match it.
The report’s authors cautioned, “LNG liquefaction capacity expansions are expected to slow significantly over the forecast horizon, increasing the risk of prolonged tight market conditions.”
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The report blamed a combination of construction delays caused by Covid-19, combined with “limited investment decisions during the period of lower oil and gas prices during the mid-2010s”.
As a result, global LNG trade is expected to grow at an annual average of just under four percent in 2021-2025, well below the seven percent recorded in the past five years.
This disparity between supply and demand has led to energy prices rising in recent months, with wholesale gas prices rising above £500 per therm in March.
While energy prices have fallen significantly since that peak, increased demand in the winter could push these prices back up, potentially leading countries to engage in a bidding war over gas.
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