As the global energy crisis worsens, natural gas prices soar

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With the reopening of the world economy, energy demand is back today – but supply has not kept up at all. This is why U.S. oil prices have soared by US$120 since they fell to minus US$40 per barrel in April 2020. U.S. oil prices closed above US$80 per barrel on Monday, the first time in nearly seven years.

Crude oil rose 1.5% to close at $80.52. The last time oil prices closed above $80 was on October 31, 2014.

All of this has caused many Americans to be shocked when they refuel-when gasoline prices usually cool down during the year. According to data from the American Automobile Association, the national average gasoline price hit a new seven-year high of $3.27 per gallon on Monday, and has risen by 7 cents in the past week alone. Since bottoming to $1.77 in April 2020, natural gas prices have almost doubled.

High oil prices will only exacerbate inflation, squeeze the budgets of American families and harm the political fate of President Joe Biden.

Unfortunately, the global energy crisis may further increase gas station prices.
Natural gas prices have soared, especially in Europe and Asia, so that power plants and factories may increasingly switch to a relatively cheap source of electricity fuel: crude oil.

Matt Smith, chief petroleum analyst for Kpler Americas, said: “This is a case of trying to maintain lighting.” “It’s essentially creating demand that doesn’t normally exist.”

100 dollars in card oil?

Citigroup on Monday raised its forecast for Brent crude oil for the fourth quarter to US$85 per barrel and said that crude oil may sometimes touch US$90. The Wall Street bank cited the “price contagion this winter” and the expectation that power plants will switch from sky-high natural gas prices to oil.

Citi added that a “very cold winter” may cause Europe to “run out of natural gas” in February.

For a long time, oil has been a potential substitute for natural gas—until recently, it had no economic significance. This is because the price of natural gas has been very low for most of the past ten years, so it is not economical to switch to oil.

A global energy crisis is approaching.There is no quick solution
But in Europe, natural gas prices have risen from less than US$2 per million British thermal units last year to US$55 this fall. This is equivalent to 320 US dollars per barrel of oil.

Bank of America warned that a cold winter could increase oil demand by 500,000 barrels per day, pushing Brent crude oil to $100 per barrel. This in turn will have a greater impact on American drivers, because gasoline prices are priced based on Brent crude oil.

Bank of America strategists wrote in a recent report to clients: “We may be only one storm away from the next macro hurricane.”

China’s coal prices hit a record high

It’s not just high natural gas prices that play a role here.

As floods in northern China forced dozens of coal mines to close, coal prices in China hit a record high. Coal is still China’s main energy source, used for heating, power generation and steelmaking. China is now struggling with power shortages, prompting the government to curtail power during peak hours and some countries suspend production.
The UAE became the first Gulf country to commit to net zero.Oil will still flow

In this context, the price of gasoline in the United States has been rising all the way, adding to the inflationary pressures that have enveloped the economy.

According to Patrick De Haan, GasBuddy’s head of petroleum analysis, the price of natural gas across the country may reach $3.30.

“Looking forward, I really didn’t see an organized drop in prices,” De Haan said. “The market is starting to feel explosive. The fundamentals continue to exist.”

OPEC is in a dominant position

Although demand is strong, oil supply has not kept pace at all.

U.S. oil production has been slow to rebound from Covid—even if prices soared. Many American oil companies are cautious about the market’s oversupply again, and they are more focused on returning cash to shareholders who have lost money in the past decade.

Although the White House called on OPEC and its allies to substantially increase production, the organization only gradually increased production in early 2020. For now, they seem content to keep oil prices high.

“They have always been the producers of swing music,” Kepler’s Smith said. “But my goodness, they must have power now.”

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