“The world is in the middle of the first truly global energy crisis,” the executive director of the International Energy Agency, Fatih Birol, said today in Singapore.
The official went on to warn that natural gas and LNG markets would tighten further in 2023, with only 20 million tons of new liquefaction capacity scheduled to come online in that year, Reuters reported.
Speaking at the Singapore International Energy Week, the head of the IEA also said that while supply remains tight, demand for gas will continue to be strong, especially in Europe and possibly in China.
Birol’s warning comes amid expectations that this winter will not be the toughest for Europe. Next winter is believed to be potentially much worse because, during the first half of this year, the EU could stock up on Russian pipeline gas, which is unlikely to come back next year, leaving the EU with a supply gap that other suppliers would be hard-pressed to fill.
Meanwhile, as many as 60 LNG tankers have turned into floating storage off European coasts as there is not enough regasification capacity on the continent to unload the cargo.
This, CNBC reports, is delaying some of the tankers’ return to the Gulf Coast to reload, and pushes gas inventories higher, Andrew Lipow from Lipow Oil Associates told the network.
“The wave of LNG tankers has overwhelmed the ability of the European regasification facilities to unload the cargoes in a timely manner,” Lipow said.
The shortage of LNG import capacity is aggravating Europe’s gas supply crisis but there is no quick solution to this problem except floating regasification units that Germany, for one, is seeking to deploy by the end of the year.
Price is also challenging, with LNG a lot costlier than the pipeline gas Europe was used to. Earlier this month, French president Emmanuel Macron slammed the U.S. for setting double standards in this respect, pointing to how gas cost much less on the U.S. market than on the international LNG market.
By Irina Slav for Oilprice.com
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Another difference is that the 1973 embargo caused global GDP to decline by an estimated 5.0%-6.0% affecting countries of the world without exception. In today’s crisis the world is on the verge of a harsh recession and also a global food crisis.
A third difference is that while the 1973 crisis was politically motivated, this crisis was initially prompted by hasty Western green policies to accelerate energy transition to renewables at the expense of fossil fuels resulting in both a tight global oil market and a shrinking global spare production capacity and also refining capacity. The current crisis has been worsened by the Ukraine conflict and particularly by Western sanctions on Russia and policies to ban Russian oil, gas and coal exports and efforts to cap the price of Russian crude.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert