Energy Crisis: Lights Out, Power Down

Energy Markets Strange Situation

Right now, the energy market is in a strange position, while rolled blackouts have loomed over the European continent as a worst-case scenario, European and Texas Natural Gas Prices have briefly gone negative – meaning producers have to pay for clients to ship them away.

Since the 1970s energy crisis, Europe (the UK included) had not experienced massive, planned blackouts due to energy shortages. As western energy-related sanctions towards Russia are about to take effect by the end of the year, and energy infrastructures like gas pipelines are vulnerable to “accidents” and direct sabotage, many countries are stockpiling fuels for the winter.

Thus, the holding capacity for natural gas in Europe has reached its limit at almost 94%, but the demand hasn’t arrived yet. Although it is already autumn/fall, Europe remains warm enough not to use heating extensively. Oil vessels are then presented with a dilemma: stay in Europe and wait for prices to recover, or sail to Asia to get paid better at once.

Most ships have decided to stay put, despite the recent decline, European natural gas futures were at 101.72 euros per megawatt hour – far from 86.7 at the beginning of 2022, leaving lots of buffers. Even if there is too much energy at hand (and by the shore), Europe is still susceptible to the use of rolled blackouts.

China and South Africa Already Implemented Power Outages

This year alone, countries like China and South Africa have already implemented temporary power outages to lower electricity consumption. Investors expect natural gas prices will surge again, as European Union’s sanctions will cut off the Russian gas supply completely, and winter is bound to come.

Europe Tries to Prepare for Winter

For now, Europe uses floating gas terminals to increase natural gas capacity in the short term, adding around 4 million tons per ship every year. Thankfully, the vessels can be converted to hold methane – a green fuel proposed on Europe’s roadmap of energy transformation. When the cold strikes, all eyes will be on Ukraine (and energy prices).

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