Energy in transition: how the global map is changing

On the gas front

Gas prices – after the lows of 2020 and the 5X magnitude increase of 2021 – in 2022 with the outbreak of the war between Russia and Ukraine reach unsustainably high levels, such as to put at risk the future demand of the less emitting one among fossil sources, it is designated to fulfill the role of “bridge fuel” towards an energy mix with zero net CO2 emissions. If at the beginning of the decade, the gas market is exceptionally long due to the Covid-19 pandemic, the consequent collapse of consumption in the productive sectors and therefore the weakness of demand, which causes a surplus on a global scale and causes prices to collapse historic lows, in the second half of 2021 it begins to feel the first signs of tension, in the face of the progressive slowdown in Russian exports, which reduces flows to contractual minimums and practically eliminates the release of spot volumes on the European market. The thermal year 2021/22 therefore begins with significantly reduced stocks and gas prices 7 times higher than on 1 October 2020. This sudden increase in prices represents only a harbinger of what will happen following the outbreak of the conflict, in the most stormy history of the gas market. During 2022, prices will reach unprecedented levels, directly influencing downstream commodities, first and foremost electricity, with important repercussions on consumers, governments, production systems and the entire global economy.

Europe compensates for the shortfall in imports via pipeline from Russia, as well as reducing gas demand, mainly by attracting additional volumes of LNG. To win the dispute with Asian countries, Europe pays higher prices for LNG and therefore loses its traditional role as global balancer (market of last resort), but becomes the premium market capable of generating pressure on all the main gas price indices.