Across the world, natural gas prices are reaching historic highs thanks to surging demand for energy, largely driven by a reopening of economies and dwindling supplies. Many countries are now finding themselves short of natural gas, causing a global bidding war that is sending prices even higher.

Potential Impacts of Natural Gas Crisis

In late December 2021, energy publication World Oil reported that natural gas prices plunged in Europe, and US natural gas futures took a dive. Central to this drop in prices and futures is the milder weather that some meteorologists have forecasted for this winter, reports that include unseasonable high temperatures on the East Coast and the southern US. While the United States might have escaped escalating energy prices due to milder weather impacts, Europe is in the middle of a natural gas energy crisis, with markets experiencing a lot of volatility. The European energy crisis is predicted to affect everyone on the planet. One of the offshoots of the health crisis of 2020 was a reduction in the amount of energy consumption, namely natural gas. However, as everyone returned to work and more businesses opened up, the demand for natural gas increased, sending prices sky-high. As a result, many countries across Europe are grappling with meeting the demands while dealing with the marked price increase. Pipelines from Norway to Russia have been limited, and decreased energy stores across Europe have contributed to this problem. Additionally, many nuclear power plants throughout the continent have been phased out, which has increased the demand for natural gas and increased the price by 500 percent. In Europe, this phenomenon has had a few immediate impacts. For one, high energy prices have put some fertilizer suppliers out of business in the UK. Throughout Europe, some fertilizer manufacturers have reduced output, increasing costs for farmers. These increased costs can translate into adding to global food inflation. The impending energy crisis will affect Asia and as far away as Brazil in places outside of Europe. In Asia, those who import natural gas have been willing to pay high prices to guarantee they have enough. Some even purchase coal and heating oil if they cannot fill the demand. This shortage can have serious financial impacts on a few industries in China. The country purchases the largest amount of natural gas globally, and even with their natural gas stockpiles, they are having trouble keeping up with demand. This increasing demand has resulted in the country’s president rationing electricity with industry to ensure no power outages. Impending power shortages in Chinese factories might translate into higher steel and aluminum prices. Other industrial makers of glass, ceramics, and cement might also respond to scarcity by increasing prices. In places such as Pakistan, higher natural gas prices have not only been the platform from which political controversy has placed state-owned operators under the suspicion of various political factions. Some believe these increasing natural gas prices might cause the economy to grind to a halt. In South America, Brazil has become vulnerable to a possible spike in natural gas prices due to reduced natural gas outputs from flows in the Parana River Basin. Moreover, this reduction has resulted in the country relying more on gas imports. Ultimately, this has increased energy bills and the chance of exacerbating the country’s inflation. Ultimately, while each country will have to figure a way out of its natural gas problem, this issue affects everyone. In the end, whether a natural gas supplying country or not, the global community stands to experience the negative impacts of a natural gas shortage.