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Monday , November 29 2021

Energy industry ‘shocked’ by soaring prices & tight supply

Russia now in full control of market

OPEC+ and its main partner Russia are squeezing on both fronts in the field of energy, oil and gas. This is causing panic in the market, as there is no end to the increase in the prices, and with oil price firmly at $80 per barrel, and gas at $300 per barrel, which is ten times higher than the level of last year. The soaring gas supply and prices have left Europe vulnerable. Also, Asia is seeking more of the Russian gas and oil. It seems Russia is now in full control of the energy market without facing any challenge and with a great grip on the market. Winter is coming and there seems to be no choice but to accept the higher prices without any alternative, and to agree to Russia’s demand for Germany and European Union’s approval of the pipeline agreement.

The supply of gas can easily move again with higher volume, provided they approve and agree to the agreement concerning the recently-built Nordstream gas pipeline from Russia to Germany and bypassing Ukraine. The main obstacle to providing more fresh gas is just the approval of an agreement concerning a new pipeline. More gas will fl ow and there will be no shortage or reduction in gas prices. The USA is strongly against this and is warning Germany against falling into the trap and the socalled blackmail. The main cause for such tightness in energy supply is the recent hike in demand, as economies are reopening and waking up to demand stimulus after the last two dull years. This is causing panic buying and activities, which is affecting everybody globally.

Reduced reliance on fossil fuels such as coal, and the impact of extreme weather globally have depleted storage facilities, closed down factories and caused earthquakes that made people scared of fossil fuels and lowered the energy throughput. China as an example has been hit hard by the surge in prices, such that it had to close down factories and reduce to four-day weeks to reduce energy demand especially with soaring demand in some factories. Will additional oil and gas supply into the energy market help to ease price hikes? Or will the world have to face higher inflation and later end up in recession? Russia has to decide with its OPEC+ colleagues regarding the affairs of oil, while gas supply is its sole discretion.

By Kamel Al-Harami
Independent Oil Analyst

Email: naftikuwaiti@yahoo.com

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