• 4 minutes Europeans and Americans are beginning to see the results of depending on renewables.
  • 7 minutes Is China Rising or Falling? Has it Enraged the World and Lost its Way? How is their Economy Doing?
  • 13 minutes NordStream2
  • 15 hours Monday 9/13 - "High Natural Gas Prices Today Will Send U.S. Production Soaring Next Year" by Irina Slav
  • 6 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 8 hours California to ban gasoline for lawn mowers, chain saws, leaf blowers, off road equipment, etc.
  • 19 hours "Here is The Hidden $150 Trillion Agenda Behind The "Crusade" Against Climate Change" - Zero Hedge re: Bank of America REPORT
  • 8 hours Did China cherry-pick the factors that affected the economic slow-down?
  • 5 days "A Very Predictable Global Energy Crisis" by Irina Slav --- MUST READ
  • 2 days U.S. : Employers Can Buy Retirement Security for $2.64 an Hour
  • 3 days Nord Stream - US/German consultations
  • 409 days Class Act: Bet You've Never Seen A President Do This.
  • 5 days An Indian Opinion on What is Going on in China
  • 2 days Forecasts for Natural Gas
  • 2 days Australia sues Neoen for lack of power from its Tesla battery
  • 5 days Storage of gas cylinders
  • 5 days Can Technology Keep Coal Plants Alive and Well?
Stuart Burns

Stuart Burns

Stuart is a writer for MetalMiner who operate the largest metals-related media site in the US according to third party ranking sites. With a preemptive…

More Info

Premium Content

Europe Desperately Needs To Diversify Its Energy Supply

  • Rising energy prices have fueled inflation that was already being stoked by commodity price increase and supply chain problems for much of this year.
  • Thermal coal prices have risen to record levels, threatening to impact GDP growth in China and India as a result of electricity rationing.
  • Europe’s energy markets are particularly exposed to supply disruptions despite supposedly being highly integrated.

We have written twice over the last week concerning the energy crunch, first in China and then in India.

Thermal coal prices have risen to record levels, threatening to impact GDP growth as a result of electricity rationing.

The Financial Times observes that China has suffered a triple whammy of emissions restrictions on power generation, a shortage of coal, and price caps on electricity that mean demand is unaffected as input costs have risen. India, which relies heavily on coal for its thermal power plant, is facing tight supplies and record prices. Nationally, it has only four days of stocks left.

Europe energy costs on the rise

But energy — whether it is in the form of coal, natural gas or oil — is a global commodity. Both Europe and the U.S. find themselves with their own set of challenges, more skewed to the tight natural gas market and rising global oil prices.

The U.K. is not alone but is possibly the most acutely exposed to Europe’s reliance on imported natural gas, particularly from Russia.

U.S. gas contracts for November delivery surged nearly 40% this week to hit £4 per therm (having started 2021 below 50p).

But a surprise announcement by Vladimir Putin yesterday saying Russia was prepared to increase supplies to stabilize prices prompted a sharp sell-off, sending the price down to £2.87.

Whether it stays there will depend in large part on whether Russia can honor that commitment in the months ahead. Russian state gas supplier Gazprom has come under intense criticism for deliberately shipping to no more than its minimal contractual obligations this year. The reality is Russia’s own inventory levels are also depleted after a harsh winter.

Related: WTI Oil Price Breaks $80 For The First Time Since 2014

It is probably fair to say Europe’s energy markets are particularly exposed to supply disruptions despite supposedly being highly integrated.

Many large industrial consumers have complained that the E.U.’s Green Deal to make the bloc climate neutral by 2050 will only push up energy prices further. In turn, that could ultimately lead to social unrest. For example, high energy prices resulted in the French “gilets jaunes,” or yellow vests, demonstrations in 2018-2019.

Inflation, energy cost impacts

Rising energy prices have fueled inflation that was already being stoked by commodity price increase and supply chain problems for much of this year. Rising energy costs and inflation have been contributing factors in the August fall in German industrial orders. Orders fell 7.7%, a far sharper fall then economists had expected.

Meanwhile, rising energy costs have prompted the closure of large energy consumers across Europe, such as ammonia and fertilizer production. Meanwhile, in the U.S., oil prices this week hit the highest level in seven years after OPEC+ decided to maintain current production levels, which will see a planned increase of just 400,000 barrels a day from November.

U.S. administrators have talked about release from the strategic petroleum reserve and even limits or a ban on U.S. exports of crude oil to limit domestic oil price rises. The average price of gas at the pump has reached $3.19 a gallon, the highest in seven years.

The U.S. economy does not appear to be unduly hindered by the price rises yet. The private sector added a higher-than-expected 568,000 jobs in September, the biggest rise in three months.  However, with midterm elections next year, high gas prices will not go down well with voters.

Looking ahead

Buyers of European components may expect to see some inflation in prices this year and next. Cost increases are coming, not just from metal prices but energy, wage costs and continuing logistics delays in Europe.

It is to be hoped the continent copes through this winter and cost increases do not derail the recovery. While manufacturers have been riding a wave of unprecedented demand recovery, it should not be mistaken as unstoppable.

A number of factors are converging to push up costs while potentially dampening demand. That makes a toxic mix for a still-fragile recovery.

By Stuart Burns via AG Metal Miner

More Top Reads from Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • Mamdouh Salameh on October 11 2021 said:
    With domestic natural gas production in steep decline and with US and Qatari LNG exports heading mostly to the Asia-Pacific region where demand is stronger and prices higher and with its rash policies to accelerate energy transition at the expense of fossil fuels, Europe is in no position to diversify its energy supplies. It has become hostage to one man: Vladimir Putin and is in no position to disentangle itself from his bear hug.

    The European Union (EU) wasted so much time preaching the world on renewables and energy transition, politicizing energy, doing America’s bidding on delaying the operation of Nord Stream 2, producing legislations and policies aimed at accelerating energy transition and ditching fossil fuels that it has forgotten to look after its energy security until it found itself facing the shortcomings of renewables and empty gas stores.

    If there is a harsh winter, the Europeans will shiver unless Putin shows benevolence towards them.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News