Enlarge (credit: Iberdrola Renewables)
Not for the first time, global energy markets are in turmoil. Internationally traded gas prices more than quadrupled in 2021. In their wake, many energy suppliers have gone bust and household bills across Europe are set to soar. Energy prices are driving up the cost of living and inflation, but this is also a moment to realize the old saying: “never waste a good crisis.”
Some of the causes of sky-high energy bills are unavoidable—there is little that most governments can do about the wholesale price of gas itself. Fossil fuel companies make huge investments that take years to mature, breeding periods of moderate prices followed by supply squeezes when prices rocket. Gas prices softened over the previous decade, and the arrival of the pandemic in 2020 depressed demand.
Regions without domestic gas supplies or which have depleted most of their gas reserves in recent decades get a lot of their gas by importing it. European periphery countries, including the UK and many parts of the Mediterranean, assumed they could rely on global supplies of liquefied natural gas. But tankers from the big gas producers such as Qatar can turn to Europe or Asia depending on who pays the highest price. Now there is a scramble, and Asian demand dominates.
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