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Europe’s Gas Prices Surge To Avert Risk Of Winter Shortage
Europe’s Gas Prices Surge To Avert Risk Of Winter Shortage
Europe’s gas and electricity prices are setting record highs on a daily basis and rising at an accelerating rate as the market tries to destroy enough demand to protect depleted inventories ahead of the winter. Gas storage sites in the European Union and United Kingdom are currently just under 76% full, compared with a ten-year seasonal average of almost 90%, according to data compiled by Gas Infrastructure Europe.
In the last decade, storage has emptied by an average of 57 percentage points over winter, but depletion is highly variable, ranging from a minimum of 38 points in 2013/14 to a maximum of 71 points in 2017/18.
If this winter sees an average drawdown, storage sites would be reduced to just 19% full by next spring, the second lowest for a decade, leaving the region with a persistent gas shortage next year.
If the winter sees a moderately strong draw, in the 75th percentile, storage would be reduced by 68 percentage points to a record low of just 8% next spring, increasing the probability supply will actually run out in some areas.
If the winter sees a maximum draw, similar to 2017/18, storage would be almost exhausted by next spring, making local shortages almost inevitable.
Futures prices are rising to avert this threat by rationing demand now to conserve inventories and reduce the risk of running out later in the winter.
Sharply rising prices are the reason wholesale markets (such as European gas) rarely run into physical shortages, unlike retail markets (U.K. gasoline and diesel) where price rises are typically more limited for commercial and political reasons.
Europe’s gas and electricity prices are likely to remain elevated until there is clear evidence that they have begun to reduce demand and conserve inventories.
Panic-Buying Could Leave 90% Of UK Gas Stations Dry; BoJo Considers Calling In Army To Resupply
Panic-Buying Could Leave 90% Of UK Gas Stations Dry; BoJo Considers Calling In Army To Resupply
UK politicians panic as similarities to the 1970s-style “winter of discontent” of shortages and socio-economic distress have already materialized. Prime Minister Boris Johnson requested the Army to begin fuel deliveries to petrol stations.
According to Reuters, 90% of petrol stations could run dry across major metro areas on Monday after buying panic accelerated the crisis of low fuel supplies due to a shortage of truck drivers.
The buying panic began shortly after BP plc, a multinational oil and gas company, warned last Thursday that a shortage of truck drivers is inhibiting the oil company’s ability to transport fuel from refineries to its network of service stations. By Saturday, lines of cars spilled over into the streets at petrol stations and continued into the new week. The shortage has been made worse because of hoarding.
The Petrol Retailers Association (PRA), which oversees about 5,500 independent petrol stations, said about two-thirds had run dry by Sunday night, and the Reuters figure is 90% by Monday.
PRA chairman, Brian Madderson, said hoarding had worsened the crisis as it may take weeks to restock fuel supplies in the country. He said the government’s plan to increase heavy goods vehicle (HGV) drivers would not be a quick fix.
Speaking with BBC Radio 4’s The World This Weekend, Madderson warned:
“I’ve talked to a lot of our members… They serve the main roads, the rural areas, the urban roads, and anywhere in between 50% and 90% of their forecourts are currently dry, and those that aren’t dry are partly dry and running out soon.”
In a move to boost HGV drivers, the government is considering calling the military to transport fuel to petrol stations. The country needs at least 5,000 more HGV drivers after it lost drivers post-Brexit and after the COVID-19 pandemic, which adds even more woes not just to the fuel supply chain network but has also disrupted food supplies at supermarkets.
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UK’s Fertilizer Crisis Spreads To EU After Another Firm Slashes Output
UK’s Fertilizer Crisis Spreads To EU After Another Firm Slashes Output
Europe’s energy crisis has claimed another victim, with Austrian fertilizer producer Borealis AG slashing the output of ammonia after the cost of the primary feedstock, natural gas, compresses margins in an industry already facing tight supplies, according to Bloomberg.
Borealis’ ammonia-producing plant uses natural gas to make fertilizer. The high cost of natgas makes fertilizer uneconomical to make. This is yet another sign of deepening woes for the industry after the UK government said it would provide “limited financial support” to help CF Industries restart one of its fertilizer plants this week.
The culprit behind surging natgas prices has been declining flows into Europe via Russia, though there are signs natgas shipments could increase in November. But that won’t alleviate high prices because stocks on the continent are well below average ahead of the winter season, indicating Europe’s energy crisis may drag on for months.
Disruptions of ammonia supply and other fertilizers have had a significant impact on the production of carbon dioxide supply in the UK, sending the industry into a tizzy and rippling through food supply chains, such as slaughterhouses to packaging to carbonated drinks to dry ice production.
Commodity analysts at CRU Group said half the continent’s ammonia capacity could be at risk due to dwindling production because of elevated natgas prices. Spot prices of ammonia per ton in Western Europe have surged from around $225 per ton at the beginning of the virus pandemic to $700 per ton this month.
Borealis’ reduction in ammonia production is a sign the fertilizer crisis continues to ripple across the continent. The company said Thursday it would analyze the situation” regarding its plants in Austria, France, and the Netherlands – not much detail was given.
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