Our editorial staff conducted a study and notes that it is impossible to make accurate forecasts about the gas rate in the current realities, however, we can assume a decrease in Russian gas supplies by 10-20%. Read more about the events and opinions based on which the forecast is based, read further in our article.
The start of the special operation in Ukraine in February 2022 led to fundamental changes in foreign policy, the global economy and foreign trade relations of the Russian Federation with other states. Plans for the transition to “clean” energy also make you wonder what will happen to the gas price in the coming months and years. We also note that all countries of the world are faced with a difficult process of economic recovery after the pandemic. European states and many companies have become dependent on energy. Gas has acquired the status of a major component in the global economy. For heating housing in the cold season, to ensure the operation of factories and plants.
How do Western sanctions and foreign policy affect the gas price? What prospects are opening up? What are the experts talking about? And what will the gas price be like in 2022-2023? Let’s figure it out.
What has changed lately?
Between 2016 and 2021, there is an accelerated growth in gas demand due to the fuel shortage problem that has arisen. This problem has been brewing for a long time, when the economies of many countries of the world increased gas consumption, reducing the use of coal. Satisfying the needs of citizens, companies and enterprises in fuel is becoming increasingly difficult. The adoption of several packages of EU and US sanctions against the Russian Federation had a negative impact on the state of the gas market. And the main reason for these actions lies in the disapproval of the government of the leading economies of the special operation in Ukraine.
Important: The desire of European countries to abandon Russian gas will create conditions for high competition for fuel between the EU and Asia. This will be especially aggravated in relation to the demand for liquefied gas. The lack of investment in this industry makes it impossible to meet the ever-increasing demand for fuel. Experts note the emergence of many difficulties in the LNG market. The shortage of fuel in the global market by 2024-2025 may reach 100 million tons annually. This figure is comparable to the annual consumption of liquefied natural gas by China (the largest importer of natural gas).
Natural gas price forecast is made up of five main components. These are the price of natural gas, payment for transmission services, distribution operator services, additional taxes, value added taxes established by the state. The cost of natural gas is determined depending on the indicators in the global market, that is, it is dictated by free conditions. The price fluctuates taking into account the situation in foreign policy, and is tied to a greater extent to the American and European gas exchange indices. These are standard rules regarding changes in the gas market in the 21st century. Below are graphs of natural gas price dynamics from the beginning of 2022 to the present day.
Director of S&P Global James Taverner, even before the start of the special operation in Ukraine, did gas forecast, based on available data. He noted the tension in the global LNG market, a record increase in prices that exceeded the allowable values. James Taverner states: “The challenging market environment is likely to continue for the next few years. At the same time, prices will fluctuate strongly almost every day, like on a swing.” It is also worth noting that natural gas buyers from North Asia (China and India as the main importers) have reduced spot purchases. Such a decision is reasonably reliable for reducing gas prices in the short term.
In March-April 2022, Russian gas continues to flow to Europe and North Asia. However, the volume of deliveries fell to a record low. The introduction of an embargo on fuel from the Russian Federation can lead to sad consequences. This must be taken into account when building gas price forecast for this and subsequent years. Recall that Russian gas is important for Germany, Poland and other EU countries. An immediate cessation of supplies will trigger a recession in the global market. This will complicate an already difficult situation and lead to a further rise in prices. This is the general position on possible changes. Let’s see what are gas forecasts for today from experts in the field.
Gas Price Forecast
The record increase in gas prices at the end of February 2022 was associated with the foreign policy decisions of the Russian Federation. However, by mid-March – early April, there is a decrease in spot indicators for fuel in Europe. According to experts, the most important factor influencing the energy market now is geopolitics. The decline in quotes is justified by the reliable world community for the end of the special operation in Ukraine and for the restoration, albeit a long one, of economic ties with the Russian Federation.
Important: Aleksey Grivach, Deputy General Director of the National Energy Security Fund, also noted that: “The fall in spot prices for natural gas is associated with the end of the heating season and a decrease in physical demand. Fears about possible interruptions in supplies from Russia did not come true, which calmed the market.”
It is impossible to make accurate forecasts now about changes in the economies of the EU countries, the USA, Russia and other states. Much depends on geopolitical indicators, foreign policy and individual decisions of representatives of the leading countries of the world. This also affects forecasts on the exchange rate of foreign currencies, on the demand and supply for natural gas and other resources that the Russian Federation actively supplied. Europe’s dependence on Russian fuel is confirmed by all experts. At the same time, Aleksey Grivach stated that: “current prices still remain prohibitively high: 2 times more expensive than oil and 5 times higher than gas quotes in February 2021.” The chart below shows changes in spot gas prices in Europe. And in this example, we clearly see the volatility and volatility of such economic indicators.
It is now impossible to talk about accurate forecasts for the gas rate. The only thing you can be sure of is the existing deficit for blue fuel. Due to changes in foreign policy, European countries intend to reduce the volume of Russian gas supplies. Taking into account market indicators, the decrease in gas supplies is from 10 to 20%, that is, about 140 billion cubic meters. It is also worth noting that the EU is pinning its hopes on expanding LNG purchases. But the industry has a number of unique challenges. The US plans to increase supplies by only 15-20 billion cubic meters. m per year. There is also strong demand for natural gas in Asia. However, it is still impossible to make any forecasts regarding this region due to the lack of an official position of the countries.
The materials presented in this section do not constitute individual investment advice.