Gas prices expose Europe’s energy vulnerability
Monday, September 27, 2021
Significance
The cost of gas-fired generation sets the electricity price in much of Europe today. Falling indigenous production has left Europe reliant on gas imports and exposed it to global liquefied natural gas (LNG) prices set by fast-recovering China. This has left retail-only electricity suppliers vulnerable and increases the risk that falling disposable incomes will undermine post-pandemic recovery.
Impacts
- EU carbon allowance prices will stay strong.
- Higher energy prices will stoke inflation amid a fragile recovery, posing a dilemma for central banks.
- Rising gas prices have had ancillary but potentially alarming impacts as some fertiliser and CO2 producers have shut in production.
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