Natural gas prices are exploding: EU is struggling with uncertain future prospects!

Natural gas prices are exploding: EU is struggling with uncertain future prospects!

The global natural gas market is undergoing profound change, which is largely influenced by political and economic factors. Russia's invasion of Ukraine not only changed the geopolitical landscape, but also significantly influenced the dynamics of natural gas trade. According to ÖkoNews, less Russian pipeline natural gas is being imported and instead LNG, i.e. liquefied natural gas, is increasingly being used. This is also reflected in other reports, such as that of the German Association of Chambers of Industry and Commerce, which presents a detailed analysis of the natural gas situation.

Despite current market developments, natural gas remains an expensive option and this trend is likely to continue in the long term. There are several factors that contribute to the increase in the price of LNG. These include the complex logistics that require transport in special vessels and decompression stations, as well as the ability for sellers to direct shiploads in real time to the buyers who pay the highest prices. In addition, the prices for CO₂ certificates are increasingly rising due to legal regulations, which further drives up the costs of using natural gas.

Market developments and forecasts

The forecasts for a global price reduction after the Ukraine war are considered risky. During 2022 and beyond, the analysis shows that gas trading in Asia and developments in the American fracking market are having a significant impact on the global natural gas market. Notably, the Asia-Pacific region will see the largest increase in consumption in 2024, led by China, which could further fuel demand for LNG. The World Bank report said that global consumption is expected to increase by 2.7% in 2024.

In Europe, some natural gas network companies have already begun to dismantle their networks because the operating costs are considered too high. The conversion to green hydrogen networks involves considerable costs, which are ultimately passed on to the end customers. Despite the population's desire for a greater switch to renewable energy, natural gas remains “green” according to the EU definition and worthy of subsidies.

Reactions and challenges

In the wake of these developments, end customers are increasingly responding by investing in private photovoltaic systems and battery storage. However, the natural gas sector appears to be torn and uncertain as investment becomes increasingly difficult without government subsidies. However, speculative profits do not offer a long-term perspective, which further increases uncertainty in the market.

Overall, the situation on the global natural gas market shows that the changes are not only short-term in nature, but will also have a decisive impact on the future energy concepts and strategies of many countries. The role of LNG as a short to medium-term alternative to no longer needed pipeline imports is therefore increasingly increasing, which also influences Germany's strategic direction in the energy sector, as can be seen from the analysis reports.

In summary, the natural gas market is a dynamic and challenging terrain where geopolitical developments and technological changes go hand in hand. It remains to be seen how the situation will develop and what role renewable energies will play in this context.

The content of this article is based on the comprehensive information from EcoNews, dem German Chamber of Industry and Commerce as well as the statements of the World Bank.