Since the end of the summer, oil and gas prices have skyrocketed. They give rise to concerns about difficulties in paying household energy bills for the next winter, especially in Europe, and inflationary pressure on the world economy.
On the oil side, prices have never been so high since 2014, a spectacular turnaround when not so long ago, in April 2020, these prices plunged into a negative zone, following the outbreak of the pandemic. .
As for gas, current prices are six times higher than at the same date last year in several European countries.
This dramatic rise in prices is due in large part to the post-pandemic economic recovery. According to the International Monetary Fund, the global economy is expected to grow 6% this year, compared to less than 3% in pre-pandemic.
And on the supply side, supplies, a time slowed down by the health crisis, show reduced stocks due to the late cold of last winter in Europe. They are still having difficulty keeping up with the surge in demand.
With this boiling, Alberta’s oil production increased by almost 20% between August 2020 and August 2021.
And the American deliveries of liquefied natural gas during the first six months of the year show an increase of more than 40% compared to 2020. These exports eye markets like Asia, a continent in full economic recovery and huge consumer of energy.
Local factors are also involved in explaining the surge in gas prices: in Great Britain, it has been reported that it has been less windy lately, reducing the contribution of electricity from offshore wind turbines. This gap had to be filled. to gain with gas, even coal.
Renewable energies still targeted
The current energy crisis in Europe has allowed commentators to target climate policies and unreliable renewables as being partly responsible for the current situation.
It seems to have become a reflex for some to blame renewables during energy crises. During the extended outages of February 2020 in Texas, following an unprecedented cold spell, several pointed out the wind farms, numerous in this state, with more than 30,000 megawatts of installed capacity, making Texas the the undisputed leader of this form of energy in the United States.
But the analyzes produced after the fact on the causes of this crisis had essentially identified the lack of robustness of the equipment of the gas power stations as the determining factor explaining the failures of the network.
It is certainly not wrong to say that renewable energies must be coupled with a reliable and constant source of energy to fill their intermittence, and that the energy transition will be long, difficult and unequal between countries, and that it will take time.
But renewable energy sources have advantages that gas does not provide for places, such as in Europe, which have to import energy on a massive scale: energy independence and price stability.
An interesting winter for Hydro-Québec sales?
Another factor that this crisis highlights is the internationalization of gas prices. In the past, gas was transported over long distances through gas pipelines, and therefore over delimited territories, to supply a regional market.
With the possibility of transporting it by LNG carriers on all continents, gas is becoming a commodity whose prices result more from transactions subject to the vagaries of world markets.
This is not without interest for us, because Hydro-Québec’s main competitor in its export markets is gas, which replaces coal as a fuel for the operation of electricity production plants.
As the price of gas is expected to be significantly higher this winter, it is hoped that this situation will favor the exports of clean electricity by the Crown corporation.
Because they participate in efforts to reduce greenhouse gases in the northeast of the continent and, in addition, contribute significantly to the size of Hydro-Québec’s net income, and the annual dividend that it pays. to the government.
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