The global energy crisis worsened on Wednesday as further rise in natural gas prices in Europe and the United States threatened to push some of the world’s largest economies into recession.
Gas markets in Europe jumped 6 percent on Wednesday to 236 euros per megawatt-hour, taking the week’s gains so far to 14 percent. The last price was roughly equivalent to $400 a barrel in terms of energy, as traders raced to secure supplies before winter. Prices have more than doubled from already very high levels since June.
The moves came on the heels of Russia restricting supplies in response to Western powers’ support of Ukraine in the wake of the Moscow invasion, as traders fear competition for seaborne LNG shipments with Asian facilities ahead of the winter heating season. European politicians accused Moscow of arming the supplies.
with Gas Prices are more than 10 times their normal level, the possibility of a deep recession has grown, as investors are now more pessimistic about the German economy than at any time since the eurozone debt crisis a decade ago.
European gas prices are expected to remain near record levels or trend higher as winter approaches, as Berlin debates the possibility of gas rationing and governments from London to Madrid prepare to support the punishment of utility bills.
Further price gains would increase the cost of supporting households, including in the UK where pressure has grown on the next prime minister to limit potential bills even if Russia cuts supplies completely.
“European gas prices are still climbing to their new peak,” said Bill Farren-Price, a director at energy consultancy Envirus.
“With customers facing a possible full Russian shutdown even before winter begins, there is not much to halt this rally until we see significant demand destruction, which likely means a deep recession. We are not there yet.”
US gas markets are still much lower than in Europe thanks to US gas markets rocky The drilling boom over the past 15 years, but rising energy costs helped drive high inflation over the decades, causing the White House to worry.
Record US gas rose more than 7 percent over the course of the week by Wednesday morning, to $9.40 million British thermal units — close to levels that prevailed before the shale revolution.
Analysts said further increases are expected in the coming months on both continents as demand rises, winter approaches, and governments race to replace Russian energy in Europe.
In the UK, the record contract for September delivery gained nearly 17 per cent for the week to just under £5.15 in the heat.
In continental Europe, the price of standard gas is around $70 million British thermal units, with record prices reaching electricity markets where prices have risen to six times the level of last year.
Metals company Nyrstar, controlled by commodity trader Trafigura, said on Tuesday it would indefinitely halt production at one of Europe’s largest zinc smelters, becoming the latest industrial victim of the energy crisis.
Peter Rosenthal of consultancy Energy Aspects said the price increase in the US followed data indicating a recent slowdown in production from new oil and shale gas wells due to lower drilling, pipeline network bottlenecks and higher production costs.
“It’s a fundamental shift,” said Stephen Schork, editor of energy market newsletter The Schork Report. He added that more than a decade of cheap US natural gas “is now a bygone era”.
Gas prices in the United States have risen with underground stocks falling 12 percent below average levels, in part because power plants are burning more fuel to meet electricity demand during the hotter-than-normal summer.
Prices rose even as the Freeport LNG export plant in Texas, one of the nation’s largest gas consumers, temporarily closed after Explosion.
Restarting the free port as soon as possible in October will make more supplies available to Europe, which could lower prices across the Atlantic but increase demand in the US.
Additional reporting by Harry Dempsey in London and Martin Arnold in Frankfurt
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