Name: Why are natural gas prices so high? | CNBC Explains
Uploaded: 2021-10-07T19:40:13.000Z
Duration: 8 min 29 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

gas prices are at record highs across the world.

Adverbs of manner

But the situation has especially become a problem in europe.

Adverbs of degree

Several governments have warned european countries could face gas shortages and even blackouts as temperatures drop.

Natural gas is one of europe's top sources of power, a move that has proven costly.

The continent's gas prices have surged by nearly 500% over the previous year.

Particular concern is how this will impact millions of low income households were going to be facing a really tight squeeze on their finances through winter.

There's been research that suggested that in the UK for example, a typical low-income household will be as much as £1,750 worse off by next spring.

That's a huge concern, particularly as analysts warned that sky high gas prices are likely to be here to stay for that period for policymakers, this is really the stuff of nightmares.

So what is behind the increase in prices around the world?

One of the reasons behind the natural gas price hike is rising demand to learn more.

I called up Sam MEREDITH, a correspondent for CNBC who follows energy closely.

So why have we seen demand shoots up in the way that it has in recent months.

We've seen hot weather in places like china and Japan and South Korea really drive up demand for liquefied natural gas and that's raising prices.

Whereas in South America in a country like brazil a drought has seen it look to really ramp up its gas fired power generation.

When you bring this back to europe, we saw in april May earlier this year, unseasonably cold weather conditions.

And this meant that europe's natural gas storage levels dipped below pre pandemic five year averages to those closely monitoring europe's natural gas storage levels.

A clear warning sign of a potential supply crunch and sam is exactly right.

The rising demand only tells half the story.

Supply has also been on the decline as well.

Over the last few decades, domestic production amongst major european suppliers has dwindled significantly.

For instance, in 2020, Dutch and British supplies of natural gas.

We're down by about 75% and 65%, respectively, from the uh peaks reached more than two decades ago.

This decline happened because suppliers in some European countries had environmental and financial concerns about major gas storage sites.

For example, in 2017, energy giant Centrica shut down the UK's largest natural gas storage facility after it was deemed neither safe nor financially sustainable enough to operate.

It had been responsible for providing up to 70% of the country's gas storage capacity.

The decline in domestic production increased these countries, reliance on international suppliers such as Russia take the Netherlands imports rose from nearly 17,000 m3 in 2009 to more than 49,000 and 2019.

I found that exports from Russia make up more than half of Europe's gas exports.

How does this affect the trading links between Russia and the rest of Europe to Russia is a gas rich country, hugely so.

And as you said, supplies a significant amount of the EU's gas.

What this often means is that it's a hugely sensitive geopolitical issue.

What we're seeing right now is that Russia has been limiting its supplies of gas to europe and even amongst calls for it to deliver more has resisted.

Why are we seeing these trade tensions between Russia and the rest of europe?

It's really important to mention these ongoing tensions because the EU and Russia, Their diplomatic ties have been deeply strained since 2014 and that year.

It was when Russia annexed Crimea and also backed pro Russian separatists in Eastern Ukraine.

Um, it's in this Donbas region that Ukraine says more than 14,000 people have lost their lives amid the seven year conflict when it comes to gas.

Russia's role in this crisis, according to many in europe, has been seen to deepen the problems that the region has been struggling to get over.

Whether that's a reluctance on Russia's side or simply an inability to deliver the gas amid some outage problems is not clear.

But adding some weight to the former is the International Energy Agency, which is a real surprise given it's typically a fairly conservative group.

They issued a very rare public rebuke of Russia issuing a statement urging them to deliver more gas to europe in order to underscore its quote reliable supplier reputation.

Another element which is of interest certainly is North Stream two.

The North Stream two is a subsea gas pipeline running from Russia to Germany.

This $11 billion dollar project has the potential to double the amount of gas supply to europe and curb the rise in gas prices.

But some European countries are yet to approve it's use and have accused Russia of withholding gas supplies to bolster its case for the Nord Stream two.

Part of the reason though, that it is so contentious is because it does not meet europe's climate goals.

And critics argue that it would deepen europe's reliance on Russian gas, while also likely strengthening President Vladimir Putin's economic and political influence over the region.

Actually, I recently spoke to the Chief executive of Ukraine State Energy giant Nafta gets, and in our conversations, he was telling me that he believes the Kremlin is using gas as a geopolitical weapon.

It's sharp criticism like this and from other eu lawmakers, which has recently prompted gas from which is Russia's state gas giant to suggest that it now stands ready to deliver more gas to europe.

So surely you may be thinking this is the right time to lean on renewable energy sources.

Unfortunately, it's not that simple Countries across Europe have been transitioning to renewable energy sources in an attempt to combat the climate crisis.

The European Union has even dedicated $1 trillion 2050 Between 2004 and 2019.

The European Union's share of energy from renewable energy sources increased from just under 9% to 18.9%.

But this transition appeared threatened in 2021 when output from wind turbines, one of Europe's main renewable energy sources dwindled.

This was due to record low wind conditions.

Its purported though, that it's a bridging fuel, right?

So we can we can use it now and for a few years and then eventually will go to renewable sources.

Experts have been unable to agree on whether europe's transition away from fossil fuels has contributed to soaring gas prices.

Some say low output from wind farms has caused an increase in demand for natural gas, which in turn has contributed to soaring prices and raised doubts about europe's climate policies.

But others have said reliance on these renewable alternatives as part of the solution and not the problem.

The EU's climate chief has said that if the Green deal that the bloc imposed recently had been in place five years ago, it would be a very different scenario that we're looking at right now, and that's because europe's fossil fuel dependency, it would be much, much more reduced than it is at present.

The Iaea has been clear to me that this gas spike should not be a reason to derail europe's move towards renewable sources and away from fossil fuels.

It was quite nice to read my book on the commute actually, rather than my community from my bed to my desk.