Europe’s high energy prices are just the beginning

European energy prices might be at record levels, but there is still room for prices to run, according to a Bloomberg analysis.

Of course, natural gas prices are soaring everywhere—not just in Europe. The US benchmark price for natural gas has nearly doubled over the last year, with front-month Henry Hub prices reaching $4.690/MMBtu as of September 6. And that’s despite record natural gas production in hot basins like Appalachia.

But US gas exports are soaring more, hitting all-time records.

For Europe, which is coming off pandemic restrictions, the increased demand for natural gas and electricity as people return for work is triggering higher prices, and therefore inflation. Germany is battling the highest inflation since 2008, thanks to higher energy prices.

Typically, demand for natural gas this time of year is still low.

Today’s high prices, at a time when demand is typically low, are worrisome for Europe, which is now looking at a difficult winter, with natural gas inventories at painfully low levels.

The situation isn’t helped any by wind power, either, because low wind speeds and high temps are tamping down renewable power production, and in the process, paving the way for higher coal consumption.

And if Europe is still hoping that its own fossil fuels would prevent a winter price crunch for power, it would be wrong. According to Bloomberg, several production outages and declining gas fields have helped to send natural gas prices trading at a premium to crude oil.

Some estimates see retail consumers paying 20% more for utility bills.

Julien Hoarau, head of Engie SA’s analytics unit EnergyScan, said that Europe’s problems haven’t even started yet.

This article was originally published on Oilprice.com