Europe’s energy crunch is far from over, but a flotilla of liquefied natural gas (LNG) tankers from the U.S. are set to resupply the fuel-starved continent. European gas prices fell for the sixth day, the longest decline in more than a year. Even though natural gas prices are retreating from record highs, household power bills, especially in Brittian, are likely to remain high until 2023.
This year, Dutch TTF natural gas prices surged more than 400% on low supplies ahead of the Northern Hemisphere winter and Russia reducing flows. The news of the flotilla of U.S. LNG tankers headed to the region last week began the decline, nearly halving gas prices. On Wednesday, prices slumped again, down as much as 10%, for the sixth consecutive session but remained five times higher than the five-year average.
Even though new data shows, the US-EU shipping lane is clogged with LNG tankers headed for Europe, as many as 20 at the moment — there is reason to believe this will only be a temporary relief.
“Europe’s gas problem may not go away next year,” said Andrew Hill, head of European gas analysis at BloombergNEF, in a report on Wednesday.
“Geopolitical issues and acrimony with Russia, particularly around the Nord Stream 2 pipeline, will increase the scope for Russia to limit flows to Europe in the first half of the year, and potentially much longer,” Hill explained.
The good news is that LNG supplies are entering the grid as current weather outlooks are mild for the time being.
Also, electricity and gas suppliers are warning the energy crunch will persist through 2023. According to the Financial Times, British households will feel the pain of unprecedented power bills for at least another 18 months.
Martin Young, an analyst at Investec, said, “directionally, we could see further upward pressure on household energy bills come October 2022.”
“This has now moved from an energy supplier crisis to a cost of living crisis,” Young added.
Business secretary Kwasi Kwarteng told attendees at a virtual conference on Monday that more relief would be needed for households.
“This is a train wreck that we’ve seen coming for months.” It was time for the government to “step in and support those who will be battered hardest by an inevitable price storm,” Adam Scorer, chief executive of charity National Energy Action said.
To sum up, temporary relief will be seen as new supplies from the U.S. enter the European grid. The energy crisis is far from over as it may persist well into late 2022 or even 2023. Perhaps German regulators should stop twiddling their thumbs and certify Russia’s Nord Stream 2 pipeline to resupply Europe’s depleted reserves before summer.