Experts and industry leaders warn that natural gas is fast approaching a crisis as prices are soaring high due to the coming winter.
In what’s being called a “snowball effect,” prices for natural gas are expected to rise exponentially, warns Leopoldo A. Salinas, Acclaim Energy Mexico’s Business Development Director.
Recent events, he says, have proven natural gas to be susceptible to price alterations mainly due to a demand increase and production drop, as seen in past weeks. These fluctuations may be worst felt by final users, primarily households, in their electric bills. This puts the Mexican government at odds with its population, given that they will have to continue subsidizing energy delivered to the general public while keeping prices low despite international market conditions.
EU countries like Germany, France, Italy, Spain, and the UK have also faced unprecedented and highly controversial spikes in their electric bills; the affected include not only families and small businesses but the whole of the industrial and commercial sectors.
Acclaim Energy’s report claims that the reasoning behind these gross price increases includes a lower than average temperature throughout last spring, which caused natural gas reserves to stand at 20 percent lower than usual.
Furthermore, much lower wind resources were captured in the North Sea, while coal-burning production stopped by countries trying or wanting to tackle climate change. These lowered productions, coupled with a greater demand for the resource due to lower temperatures, caused the current natural gas situation in the EU and, by extension given the market, the world.
The situation in the Americas is not much different. Natural gas prices have been steadily increasing as the winter season approaches. In the past few weeks, the cost per million BTU of natural gas reached the US$5 mark, getting to US$5.552, the highest since Feb. 2014. Salinas points out that it will take a while to see prices in the range of US$4 per million BTU for natural gas again.
The US, for instance, has seen a surge in natural gas demand since the summer, which took its toll on reserves, going from 3.6 billion cubic feet to 3 billion cubic feet in October. August and September production problems in the Gulf of Mexico are also to blame because up to 24 percent of natural gas production in the region is still offline.