The scramble for liquefied natural gas has reached the point where tankers are literally changing destination mid-voyage. The Clean Mistral, a gas carrier sailing from the United States to Spain, abruptly turned and headed for Asia after receiving a higher offer, "Hvylya" reports, citing The Economist.
Europe's benchmark gas price climbed above 56 euros ($65) per megawatt-hour on March 9 - more than 75% higher than before the war began. The continent is acutely exposed because it replaced Russian pipeline gas with LNG after 2022. The International Energy Agency recently projected that Europe would need to import a quarter of global LNG shipments - a dependency now being tested by the closure of the Strait of Hormuz, which has halted about a fifth of global LNG flows.
A repeat of the 2022 energy crisis - when gas prices briefly topped 300 euros per megawatt-hour and euro-area inflation exceeded 11% - appears unlikely for now. But the trajectory is troubling. Higher gas prices feed directly into electricity costs, especially in Britain, where gas still fuels almost 30% of power generation.
Central bankers typically try to look through energy shocks, treating them as temporary. That strategy works only if households and businesses expect inflation to subside - a questionable assumption after several years of above-target price growth. Before the war, traders had been betting the European Central Bank would soon cut rates. Now markets are pricing in two quarter-point increases by year's end.
The bidding war on the spot market highlights a harsh reality: in a supply crunch, richer economies outbid poorer ones. Fertilizer plants are already shutting across South-East Asia as LNG prices soar beyond their reach. The Philippines has ordered government offices to switch off computers at lunch and cut air conditioning. Bangladesh has brought forward the Eid holiday to conserve energy.
Also read: Budapest Holds EU Ransom Over Halted Oil Transit.