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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Why Europe’s Energy Crisis Is A Disaster For Emerging Economies

  • As European demand for non-Russian natural gas has surged, natural gas around the world has become prohibitively expensive for some.
  • While Europe has been able to pay a premium to secure enough gas for winter, emerging economies are already suffering from blackouts.
  • The spot price for LNG is so lucrative for producers that they can afford to pay the penalties for breaching their long-term contracts and selling the gas elsewhere.

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

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Leave a comment
  • Mamdouh Salameh on November 08 2022 said:
    Blame it on hasty Western green policies and sanctions on Russia. That is why the EU will be the ultimate loser with its economy heading towards de-industrialization with factories shutting down or downsizing or relocating outside Europe.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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