European Natural-Gas Prices Hit $600 in Barrel of Oil Equivalent

Hit €345 per megawatt-hour. Before last year it never surpassed €30

Natural-gas prices shot to record highs in Europe as intensifying fighting in Ukraine threatened to reduce supplies of the heating and power-generation fuel from Russia.

Russian gas is still flowing through Ukraine in large quantities to customers in Europe. However, traders fear those supplies could be cut off as Russia intensifies its fighting, and that Russian gas supplied via other pipeline routes might get disrupted by Western sanctions on Moscow. Alternatives such as liquefied-natural gas from the U.S. would struggle to fill the hole left if Russian exports were removed, and come at huge expense as Europe competes with other gas-consuming regions for scant supplies.

Those concerns drove futures contracts for gas in the northwest European market up 42% compared with Friday’s close to more than 270 euros, equivalent to $293, a megawatt-hour Monday. Earlier in the session, prices hit a record high of 345 euros.

Before Friday, prices had never topped 200 euros, according to FactSet data stretching back to 2013. Before last year, they had never surpassed 30 euros.

The surge in prices for a fuel widely used to heat homes and generate electrical power threatens to cause economic disruption in Europe, where energy-intensive industries including fertilizer and metal producers already had cut output in 2021 when prices were well below where gas traded Monday.

The rise will likely cause difficulties for the European Central Bank, which has taken a more cautious approach to raising interest rates than the Federal Reserve and Bank of England in the face of rising inflation.

The prospect of rapidly rising energy prices in Europe, which gets about 40% of its gas supplies from Russia, prompted the European Union and U.S. to refrain from including oil and gas in their initial rounds of sanctions. The U.S., however, said this weekend it is working on plans for an embargo on Russian oil with its allies.

Source: The Wall Street Journal

  1. GMC says

    What kind of Game is this ? The west sanctions the shit out of Russian banks with no Swift and No Visa and Mastercard. And then they go after the Government workers – and keep sending weapons to Ukraine, but Hey – don’t leave us in the dark or without oil, gaz, aluminum, and a dozen other industrial natural Resources.

    I’d shut all my exports down and in 1 month I’d ask the West if they wish to re consider. I certainly wouldn’t let them stockpile any of my products. Keeping your exports heading west is like bending over – again and again and ….

    1. Fragitsa says

      What the west hasn’t realized is that Russia is rich in natural resources and that we need them more than anyone else thinks! BTW Russia has gone to the Gold Standard! Check this out!

      1. geo says

        They know… why do you think NATO circled Russia?

  2. Face of Castlereagh says

    “The prospect of rapidly rising energy prices in Europe, which gets about 40% of its gas supplies from Russia, prompted the European Union and U.S. to refrain from including oil and gas in their initial rounds of sanctions. “

    The coming inflationary effect is something that the average Ukrainian should have taken into account when even casually assessing the desirability of EU / NATO membership, in the first place. The EU financial progression seems to me like it will play out in a manner similar to the tactic that hunters use to ‘bait’ a deer stand, leaving out corn throughout the winter, causing the deer to get accustomed to coming to the area to feed, however once the hunting season opens.. the hunters recoup those ‘bait’ costs.

    Two things that I note, at least from video coverage prior to the onset of combat is, I have not seen anyone living on the sidewalk in a tent in Ukraine, like you commonly encounter in ‘rich’ US cities. This is despite US media coverage I saw which claimed that the median wage in Ukraine is approx equivalent to FRN $3,700.

    The site linked below places ‘median’ even lower at only the equivalent of $3,500.
    Average income around the world ( I have seen other sites estimate that the median wage in Kyiv is generally higher, but even this median Kyiv-local salary is in the range of US. 8k / year.

    This appears to indicate that it was actually possible to survive on these incomes.
    Although in some cases people are benefiting from money transfers through family members working in EU / Russian Federation, that would still consist of ‘income’ as far as I am aware.. In the USA + Foundational EU members – who are using the Euro currency – NO ONE could live on such a wage.. it would not be enough to cover the rudest of housing for a year, with zero other expenses..

    The main reason that Bulgaria and Poland have (temporary) exemption from Euro adoption, and likely have no interest in adopting it is, there is no benefit to them in doing so. If you immediately instituted the Euro in these states, the people would rebel and refuse to comply with membership accession, as the economic impact struck them.
    They are however eventually required to do so under terms of EU membership, which is when the ‘hunter’ cashes in on his dutiful ‘baiting’ of the kill site.

    Right now, Bulgaria and Poland benefit from EU products being over-priced for the local market, which encourages local manufactures, while suppressing external EU manufactures unless the companies individually sell at an extreme discount. At the same time, these non-Euro currency members can export surplus labor into high-cost EU/Euro currency states, which results in money transfers into their domestic economies. If similar scenarios are repeat in Ukraine, those who are benefiting from these external Euro money transfers will use it to buy up land and housing with EU bucks.

    “As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed.” – Adam Smith The Wealth of Nations

    Once Von Der Leyen Inc. eventually decide to insist on opening the ‘hunting season’ phase, small scale domestic manufacturing will rapidly take a dirt nap, prices will spike on everything, housing will be the hands of speculators who will well compensated in this arrangement, and the population will encounter Euro zone costs of living with the shared currency.

    Also, once you are under the EU membership charter, your own state becomes a target of global migration, meaning these people will no longer be passing through enroute to mis-governed Germany / France, but will collect EU benefits from within your own state. If you are unhappy with mutually intelligible Russian-speaking neighbors, you will probably not be thrilled with what is coming once you are an EU member. The first thing that comes to mind when you mention Rouen, these days, is not the Normans.

    This seems like a ‘be careful what you wish for’ scenario.

  3. SteveK9 says

    Why is there no mention of the fact that Russia can simply shut off all the flows itself. Let the ruble fall, it means almost nothing to Russia.

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