Eve is here. OilPrice overstated the potential diesel shortage, so take this prediction with a grain of salt. However, they point out that there is no short-term solution and that a series of factors are expected to cause gas demand to exceed supply. Of course, the situation could change due to a significant slowdown in the global economy.
Higher gas prices could lead to further inflation. And this is the kind of inflation that central banks can’t counter, short of killing the economy entirely. Therefore, soaring fuel prices are likely to cause mismanagement of the economy.
Author Irina Slav is a writer for Oilprice.com with over 10 years of experience writing about the oil and gas industry. It was first published in crude oil price
- Global demand for natural gas is growing faster than expected, with the International Energy Agency (IEA) warning of potential supply shortages due to lack of investment in production.
- Declining Russian gas supplies are increasing Europe’s dependence on LNG, which could lead to instability in the international gas market.
- The slowdown in LNG supply growth is driven by rising construction costs, regulatory challenges, and environmental policies.
Natural gas demand is expected to rise more than previously expected, according to the International Energy Agency reportedrecently. The agency predicted demand would remain strong next year and warned that there could be supply problems as supply growth is not sufficient.
Just one year ago, the International Energy Agency predicted that oil and gas demand would peak by 2030. With this forecast, the IEA said there was no need for further investment in the production of either hydrocarbon. Currently, there appears to be a total lack of investment in new natural gas production. Therefore, there is a shortage.
Just a few years ago, there was a significant oversupply in the LNG market. Everyone was rushing to build LNG plants, so there was more supply than demand. However, in recent years many countries have turned to liquefied fuels as a cleaner and less expensive alternative to coal. Of course, prices have changed since the days of oversupply, especially in 2022 when many Asian LNG buyers were priced out by wealthy Europe and a large portion of Russia’s pipeline supply was abruptly cut off. It turned out.
Since then, Europe has consolidated its position as a major LNG importer, and is now the last remaining Russian pipeline gas supplier after Ukraine announced it would not renew its transit agreement with Gazprom. Preparations are underway for its abolition. This means Europe needs more LNG, but new supplies are not enough. What this means is another price shock, and poor countries trying to reduce their dependence on coal are once again being hit by prices.
Given the rosy outlook for gas demand, some may be wondering why new supply is so slow at the moment. The IEA is just the latest in a series of forecasters predicting demand for the commodity will increase thanks to a move away from coal, population growth and, of course, artificial intelligence.
There appear to be several reasons for the slow expansion of supply. One is purely physical, according to a recent Bloomberg report It looked at imbalances in the natural gas market. LNG production plants take longer to build and face rising construction costs and increased regulatory burdens in the United States, the world’s largest producer and exporter of the fuel. To add insult to injury, an LNG project has just received a permit. canceled by the courts for climate change-related reasons.
There is also the so-called moratorium on new LNG production capacity, which may not be relevant to immediate demand but will be important in the medium term as big tech and its artificial intelligence rush continue to increase demand for natural gas. It will be. It was adopted by the Biden administration earlier this year based on a single study claiming that natural gas is worse for air quality than coal. Although some have criticized the study for its multiple flaws, it was enough for the U.S. federal government to tighten the market for future gas supplies.
The European Union is not helping itself despite strong demand for LNG. The bloc recently passed a new bill called . Methane regulations This aims to ensure that only low-emission LNG enters the EU. This, of course, makes it more expensive for suppliers to build production facilities and increases the final cost of fuel. The silver lining is that this regulation will likely free up non-certified LNG supplies to less wealthy buyers, relieving demand pressure on suppliers.
“Global gas demand growth this year and next reflects a gradual recovery from the global energy crisis, which hit the market hard,” said Keisuke Sadamori, the IEA’s Energy Market Director. This was stated in a news release regarding the trend. “However, the balance between demand and supply trends is fragile and there is a clear risk of future fluctuations,” Sadamori also said.
This is an interesting observation given the IEA’s firm belief that demand for hydrocarbons is being squeezed by alternative energy sources such as wind and solar. This belief has led government agencies to repeatedly predict peak demand for oil about four years out and peak demand for gas two years out. Now, gas demand still seems to be largely tied to economic growth and the absence of economic growth, which makes sense.
Europe is struggling to record any growth, and access to affordable gas is key to succeeding in this fight. Various international organizations concerned about the Earth’s climate want Asian countries to use more gas than coal as their energy demands increase. For that to happen, gas has to be cheap, and it’s not going to get cheaper any time soon. Another obstacle in the difficult transition course.
