LNG prices expected to spike again in Europe: Here's Why
- 16-May-2022 5:30 PM
- Journalist: Francis Stokes
During the latest developments in the ongoing war between Russia and Ukraine, Ukraine suspended Russian natural gas flowing through its pipeline to the rest of the European countries. This is the first action taken by the Ukrainian government in terms of disrupting the gas supply since the invasion of their country, which started on Feb 24th, 2022. Ukraine-owned gas grid operator GTSOU stopped allowing any Russian natural gas to pass through them starting May 11th,2022. This puts European countries in a delicate position as they depend 90% on imports for their gas usage, and in which 32% is from Russia.
This limited supply of Natural gases to Europe can lead to another energy crisis in Europe which may again cause many petrochemical refineries to suspend production or limit their production rates to manage the energy crisis. The energy crisis was not out of the blue as various analysts from ChemAnalyst anticipated that Europe may undergo another energy crisis during the second quarter of 2022. Many European countries knew that their dependency on Russian gas for Energy was hazardous under the current geopolitical climate and started planning to remove their Russian gas dependency by 2027, which created many opportunities for other importing countries. Various other importers jumped in to meet Europe's needs, especially the US. Japan also announced it would work with the EU to eliminate its reliance on Russian gas.
Despite other countries' efforts to help Europe meet its LNG needs, it still depends on Russian gas and has no other immediate alternatives for its energy needs. So, this suspension of gas supply by Ukraine will cause great disturbance in European countries.
According to ChemAnalyst, the LNG prices in Europe will soar, the continent's need for LNG supply will be reinforced, and the concerns over the continent's energy requirement will increase. The increased energy prices will mostly put much pressure on chemical refineries in Europe and raise the prices of various chemical commodities manufactured in Europe.