The flags of the EU member states in front of the European Parliament in Strasbourg, France
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Europe’s handling of the shift to a green economy has actually been “management by chaos” and high energy costs might continue till 2025, according to Johannes Benigni, chairman of analysis company JBC Energy.
Natural gas futures skyrocketed to 13- year highs on the New York Mercantile Exchange, with Europe in specific feeling the pinch due to worldwide supply lacks and its dependence on imports. Oil has actually likewise rallied, and worldwide standard Brent unrefined hovered simply listed below $84 per barrel on Tuesday afternoon.
Speaking to CNBC’s “Street Signs Europe” onTuesday Benigni stated that although there was some seasonality in gas costs, present need pressures had actually worsened the issue.
Benigni forecasted that gas is going to be at “very, very lofty highs” till 2025 and the spikes are not a “short-term phenomenon.”
“We are going to see that this market is under a lot of stress. As we talk right now, the prices are very hot in the pre-winter, and this is because of a lot of anxiety,” he stated.
Benigni stated that come November, Russia might launch more gas products into the marketplace. This will assist European energies to refill their stocks, however he alerted that the trajectory through the winter season would be extremely weather-dependent.
“We are now at around 75% inventory fill. This is behind schedule. They need to go much higher. Of course, remember last year, we were at 96% and it was drawn down over a very long, cold winter to 30%,” he stated.
“That was essentially the starting point for the crisis right now, that they didn’t manage to really refill their inventories that much, but this year, it is a different story altogether.”
Benigni highlighted a confluence of elements that will have ramifications throughout the energy supply chain, consisting of a significant energy crunch in Russia, a “gas-to-oil switching,” and South American need increasing due an absence of hydropower brought on by dry spells.
“We have suppliers that were simply having maintenance issues and they thought the market would not come back so quickly, so all of that takes time again to restart the engines on the production front,” Benigni included.
‘Management by mayhem’
Energy business worldwide are coming under increasing examination to leave nonrenewable fuel sources in order to speed up the decarbonization of the worldwide economy.
However, Benigni implicated European leaders of mishandling the timing and execution of the shift towards ending up being reliant on renewables.
“If you want to get out of fossil fuels, you have to invest in natural gas. That sounds, maybe, counterproductive, but to be honest with you, if you want to get out of coal, you will only achieve the same thing the U.S. has done by investing in natural gas so that you can reduce the intensive carbon emissions from coal,” he stated.
“You need to give the investors security on investment, and that only works if you are not blaming natural gas in this respect, and so this will now see, in the next few years, major repercussions.”
Analysts have actually recommended that the U.S. will be more insulated from the rate dive and energy crunch that is playing out in Europe, given that it has actually not needed to depend on imports.
Natural gas costs in Europe are up around fivefold, Deutsche Bank experts just recently kept in mind, versus around 1.5 times in the U.S. and Asia.
“The problem in energy is security of supply, and energy supply chains, we’re talking about 10 years — this is the horizon in order to change a little bit,” Benigni described.
“This is a no-brainer that we have to get green, but the question is how to get there, and in order to get there in a substantial way, you have to cut back coal.”
He included that in order to get without a dependence on coal, nevertheless, gas needs to be an option in the meantime.
“This is very difficult to achieve. In Europe, we still have a lot of coal burning right now and it is even more so because we don’t have cheap enough natural gas,” he stated.
“That shows you that whatever the politicians have been doing is management by chaos, and they’re not managing the transition at all.”