Here’s why natural gas prices are falling in Europe | Popgen Tech


The Henry Hub spot price, which is a benchmark price for US natural gas, is $7.20 per metric million British thermal unit. What is a metric million British thermal unit? Does not matter.

The thing to remember is that this benchmark price was less than $2 before the pandemic. Europe, facing an energy crisis, was particularly anxious about the rise in prices. But somehow prices have fallen there.

They were down 10% on Friday amid news that storage was keeping pace with demand.

We’ve said it before, but it bears repeating: Natural gas, as a commodity, is very different from oil.

“All the supply and demand of gas is largely connected by pipeline infrastructure,” said Eugene Kim at Wood Mackenzie. “And when you get a mismatch between supply and demand in a certain region, you start to see prices get badly disrupted.”

Which means, where there isn’t much pipeline infrastructure in New England, on the West Coast of the United States and certainly in part of Europe, the price for natural gas there is much higher.

So why is the price of gas going to fall in Europe? It’s not like it suddenly built more pipelines.

“It’s mostly, believe it or not, being really lucky with the weather in November,” said Ryan Kellogg, a professor of public policy at the University of Chicago. “The natural gas balance depends so much on what the winter weather turns out to be. And it seems that Europe, luckily for them, was very lucky and had a very warm November.”

So, he said, even though Europe has had some cold moments recently, storage has remained fairly full, so many countries have been able to keep up with the increased demand.

In addition, Germany’s first floating storage and regasification unit that will allow that country to import liquefied natural gas will come online on Saturday. That move was prompted by Russia’s invasion of Ukraine and the cutting off of that supply.

But Ana Maria Jaller-Makarewicz, European analyst at the Institute for Energy Economics and Financial Analysis, said transatlantic leaders needed to think more long-term.

“Yes, we need the gas now to provide us with that security for this winter,” she said. “But we have to focus on the future, yes? And the future, we need to diversify our energy sources.”

And, she said, Europeans must reduce demand for fossil fuels, which they have shown is possible as needed because of the lack of Russian supply.

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