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Yet Another Biden Record: Gas Prices Hit 14-Year High

Gas bill - el american

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THE PRICE OF NATURAL has currently broken another record. The price of gas, showing no signs of slowing down, now reaches highs not seen for 14 years.

The latest rise came following Russia’s announcement that it will shut down operations on the Nord Stream pipeline (the main gas pipeline connecting to Europe) later this month, reportedly for maintenance operations.

Following the announcement, the price of natural gas in Europe rose by 15%, while in the US by 3.7%.

In addition, an unusually intense heat wave in Europe and a hurricane season in the Caribbean Sea that may affect production in the Gulf of Mexico threaten to push gas prices even higher.

During this time of year, gas prices tend to moderate, however, due to supply constraints and high temperatures, gas futures prices have remained high as if it were winter.

High gas prices have not been enough to encourage US gas producers to invest in more infrastructure to extract the precious hydrocarbon.

After years of losses due to the volatility of gas prices, US gas companies now base their investment decisions more on profitability criteria than on growth, and are reluctant to make costly infrastructure investments that they will not be able to recoup in the event of a sudden drop in prices in the mid-term.

Although it has recovered from the historic low due to the 2020 quarantines, production in the gas sector in the Americas remains below its pre-pandemic levels.

The U.S. Energy Information Administration expects the country’s average daily consumption to grow by 3% this year, but this year’s production will grow at about the same rate.

The long journey of U.S. gas to reach European homes

In Europe, the situation is even more critical and energy prices are skyrocketing. To replace precious Russian gas, the European Union has had to turn to US producers.

However, the maritime traffic of gas takes longer and is more expensive. To be transported by ship, natural gas has to be liquefied in special plants and then transported by specialized freighters to Europe, where it is regasified again.

Europe has to compete with South Korea and Japan for scarce gas supplies, as the Asian countries have also considerably increased their energy consumption due to summer heat waves.

Precio del gas bate récord de 14 años

Liquefied natural gas tankers, vital for transporting the precious hydrocarbon to Europe, are in high demand in the last season. (EFE)

The demand for liquefied natural gas (LNG) carriers has jumped in recent months. At present, it can take up to two months to schedule an LNG carrier in the Pacific and there are no LNG carriers available in the Atlantic Ocean, as they are all carrying shipments of LNG to a Europe suffocated by energy costs.

This suffocation could become practically fatal in the event that Russia’s invasion of Ukraine extends into winter. Vladimir Putin, in an effort to pressure the European Union to withdraw its war support for Ukraine, may again cut off gas supplies in a season when it is essential for Europe, which would lead millions of households to face energy rationing and prices to jump again.

Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica

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