Dr Nakhle argued that the primary reason behind low natural gas stocks in Europe is the longer-than-expected winter season of 2020 which exhibited some pressure on inventories. The drawing of gas stocks coincided with strong economic rebound and limited gas supplies (due to diversions of LNG cargoes to Asia, and strategic supply restrictions from Russia).
What distinguishes this crisis from previous ones, however, is that it didn’t occur in the winter season where gas prices are relatively higher than during the summer season. Norwegian and African supplies have responded to higher prices but not enough to compensate for limited supplies from Russia. A challenging winter may well be awaiting Europe if additional supplies aren’t secured.
Dr Nakhle further added that Russia is trying both to take advantage of higher prices and to gain support for Nord Stream II. She concluded that high energy prices will have a more burdensome effect on consumers at this critical stage of economic recovery. Quoting the UK’s Central Bank, she warned that high inflation could come as a result of high energy prices and the first to be affected are the low income individuals.
“Gas prices jump in Europe“, Dr Carole Nakhle, Sep 2021