Analysts and industry executives warn that if Europe does not secure new gas supplies and reduces demand, the region risks the energy crisis lasting years longer.
While the situation in Europe with their gas supplies has cooled off due to a mild autumn resulting in energy storage being secured for this winter, concerns are mounting for how Europe will handle supply constraints and having replenished energy storage moving into next summer and the following winter.
Sid Bambawale, head of liquefied natural gas for the Asia region at Vitol, the world’s largest independent energy trader, speaking at the Financial Times Commodities Asia Summit in Singapore said “We are in a gas crisis, and we will continue to be in a little bit of a crisis mode for the next two or three years,”.
Bambawale warned that they should “not develop a false sense of security.”
Another industry leader Kosuke Tanaka, head of Asian LNG origination at Japan’s energy trader Jera Global Markets, said that demand destruction is currently cooling the situation:
“The [gas] market is currently balanced with demand destruction, including fuel switching to oil and coal. And we will still need such demand response to balance the market in the coming years.”
In order for the situation to remain consistence, Russell Hardy, chief executive of Vitol says that gas prices would need to stay sufficiently high to suppress energy demand over the summer by industrial users in order to refill storage and keep the lights on.
“High prices will have to compress demand largely every month of next summer. It’s not a good thing — it’s an absolutely awful thing for European businesses and that’s the genesis of the recession,” Hardy said.
Gas prices in Europe have an average of €108 a megawatt hour in 2023, which is more than four times the average of the previous decade.