The 20 years of bad energy policies have devastated Europe’s energy market and caused the energy inflationary ripple effect. The high prices of energy ripple through the commodities and down to the consumers. The biggest issue on the horizon is the increase in food prices as fossil fuels are required to grow crops and fertilizer.
The forced march to renewables by the EU leadership without a plan has played into Putin’s plans for domination. Russia’s stranglehold on natural gas prices comes at a high political and fiscal price tag. This weekend traders are waiting on the monthly auction for transit capacity. This sets the stage for Gazprom on their plans for January, and subsequently prices.
As I have talked about in many articles the Russian Nord Stream 2 pipeline to Germany from Russia is a political club, but now does not look like it will be approved for service until the second half of 2022. This means that the EU will rely on the older pipelines from Russia with many bottlenecks and problems for getting the natural gas to market.
So what does this mean to the U.S. energy markets you ask? Well, this weekend we now have 20 LNG tankers in route to Europe stuffed with LNG exports from the Haynesville and Permian shale reservoirs. Shipments in route to other countries have been diverted and now causing traffic problems in the EU shipping channels. The U.S. Shale exports of LNG accounted for a significant portion of the energy exports over the last 8 years.
Getting back to the ripple effect. The increased LNG exports to Europe are impacting the prices and causing the first movements downwards in months. This will not be enough to stop the shortage and cost problems with agricultural food production but will help the energy consumers in the short run. This drawdown of natural gas from the U.S. shale E&P companies will continue to reduce the natural gas inventories just before the January cold spells and increased demand for natural gas in the United States.
According to the EIA, Over 40% of the electricity in the United States is generated by natural gas. This provides lower energy prices to the energy consumers in most of the U.S. The exceptions are in the areas of the country that have banned pipelines and import Russian natural gas. Or have followed the energy policies of Europe that have helped cause the energy crisis. So using the old supply and demand formula, there will continue to be an increase in natural gas prices in Q1 2022.
The Bottom Line:
So once again the shale E&P companies are the unsung heroes of energy and are providing energy to be exported and ultimately keeping the prices down for the consumers in the U.S. We will see an increase in natural gas prices, but thankfully not to the European disaster. Our research team is looking at the supply and demand numbers to make forecasting numbers for our financial models. Too early to get an accurate prediction, but is looking to be well over the $5.25 range in Q1 2022. Great news for the King Operating investors and stakeholders.
Market and financial impact will be a continued increase in jobs for the oil and gas producing states, stable energy prices, and U.S. consumers out of pocket spending. Our commitment as an E&P company has always been delivering low-cost energy to the American markets. Once again you will see a rise in the shale oil-producing states in income through tax, jobs, and energy exports.
Have a fun and safe New Year celebration. We have a lot to celebrate as Americans and can look forward to great things next year.
And visit the King Operating Website for more market information and insights.