Europe is facing an energy crunch caused by surging wholesale prices for natural gas, raising the prospects of higher utility bills for customers and forcing some manufacturers to halt operations.
A complex brew of forces is causing the European gas market’s unprecedented surge, creating a “perfect storm” of higher than expected demand and low supply.
"We have never seen prices like this,” said Ira Joseph, the global head of generating fuels and electricity pricing at S&P Global. “We expected some sort of recovery after COVID because prices were so extremely low last year, but this is really extreme stuff."
Global demand is up as economies open from the coronavirus pandemic, while a cold snap that occurred in the latter part of winter this year drained storage levels below normal levels, meaning there is little spare capacity.
There are other factors at play. Stronger demand for liquefied natural gas exports in more competitive Asian markets has diverted cargoes away from Europe.
Europe has also experienced unusually calm weather in recent weeks, leading to less wind power output and creating additional strain on gas supply, particularly in the United Kingdom, where wind normally provides 20% of the country’s electricity.
Biden's attacks on US energy production are also a likely culprit especially when it comes to LNG exports. The dependence on the wind as an alternative energy source has also creacted problems whether it is extreme weather or a lack of wind movement. It is a prelude to what will happen in the US if Biden's energy policies are put fully in place.