The surge in natural gas demand from Europe has led to a surge in prices that has devastated emerging economies in other parts of the world and this devastation could drag on for years, Bloomberg reports.
“Energy security concerns in Europe are driving energy poverty in the emerging world,” Saul Kavonic, Credit Suisse energy analyst, told Bloomberg. “Europe is sucking gas away from other countries whatever the cost.”
The fact is that European countries can afford to pay a premium for natural gas while poorer nations such as Pakistan or Bangladesh don’t have the money to afford such a premium. Pakistan, by the way, is already suffering blackouts for most of the day and there is little chance of that changing anytime soon because of exorbitant LNG prices.
“Suppliers don’t need to focus on securing their LNG to low affordability markets,” Wood Mackenzie analyst Raghav Mathur told Bloomberg. What’s more, the spot market is so lucrative at the moment that producers can breach their long-term contracts and afford to pay the penalties with money made on that market.
The situation is unlikely to change in the observable future. On the contrary, Europe is building LNG import terminals, meaning the current level of demand might extend over a longer period of time despite the EU’s bold emission-cutting ambitions.
And this means emerging economies’ energy supply troubles may well extend over a longer period of time as well as they are forced to compete for the limited supply of LNG with some of the wealthiest economies in the world.
Russia, meanwhile, is only too happy to step in and supply LNG to Pakistan, which is only too happy to take it. As the Pakistani ambassador to Russia told TASS news agency recently, “If the rich countries take away all the LNG, what is going to happen to us?”
By Irina Slav for Oilprice.com