As the EU summoned an emergency conference to address increasing costs, President Vladimir Putin said Russia was not using gas as a weapon and was ready to help ease Europe’s energy crisis.
As economies recover from the pandemic, demand for energy has increased, driving up oil, gas, and coal costs, fuelling inflationary pressures, and weakening efforts to reduce the use of polluting fossil fuels in the fight against global warming.
China, the world’s second-largest economy and the world’s largest emitter of greenhouse gases, has increased coal production and imports as local coal prices have reached new highs and power plants have battled to keep the lights on in households and companies.
The energy crisis has emphasized the International Energy Agency’s (IEA) request for tripling renewable energy investment to stabilize markets and combat climate change, which was issued on Wednesday.
Europe’s gas shortage has focused attention on Russia, which supplies a third of the region’s gas, causing European politicians to accuse Moscow of not pumping enough.
Putin said the gas market was neither balanced or predictable, particularly in Europe, but that Russia was honoring its contractual responsibilities to provide clients and was ready to increase supplies if needed.
He dismissed accusations that Russia was using energy as a weapon: “This is just politically motivated chatter, which has no basis whatsoever.”
The European Union has not asked Russia to increase supplies of gas to the bloc, a European Commission official told Reuters.
Russia and Europe have been embroiled in a dispute over a new pipeline, Nord Stream 2, to supply Russian gas to Germany. The pipeline is built but awaits approval to start pumping, amid opposition from the United States and some Europeans nations that fear it will make Europe even more reliant on Russia.
Some European politicians say Moscow is using the fuel crisis as leverage, a charge it has repeatedly denied.
The European Commission outlined measures on Wednesday that the 27-nation EU would take to combat the energy crisis, including exploring a voluntary option for countries to jointly buy gas.
Ministers from EU countries hold an extraordinary meeting on Oct. 26 to discuss the price spike.
“The only way to fully decouple gas from electricity is no longer to use it to generate power,” EU energy policy chief Kadri Simson said. “This is the EU’s long-term goal, to replace fossil fuels with renewables.”
The Paris-based IEA said the world had to invest $4 trillion by 2030 in clean energy and infrastructure – triple current levels – to achieve net zero emissions and limit global warming to 1.5 degrees Celsius by 2050, the target of the 2015 Paris climate accord.
“The world is not investing enough to meet its future energy needs,” it said in a report, published before the United Nations COP26 climate change conference in Glasgow, Scotland, which starts on Oct. 31.
Oil and gas prices have soared as renewables have failed to fill gaps in the face of rising demand.
The Organization of Petroleum Exporting Countries lowered its prediction for world oil demand in 2021, but warned that rising gas prices could cause users to switch to oil.
The price of benchmark crude was hovering at $84 a barrel, close to a more than three-year high set last week.
Oil prices, according to Putin, might reach $100 per barrel. “It’s entirely feasible,” he replied. “We and our OPEC+ partners are doing everything we can to keep the market stable.”
The benchmark European gas price is up more than 350% this year, trading above $31 per million British thermal units (mmBtu) on Wednesday, although down from last week’s spike above $52.
“Current prices are above fundamentally justified levels, should remain volatile and could still reach $100/mmBtu or above this season if the weather gets very cold,” Citi bank said as it also raised its forecast for European and Asian benchmark gas prices for the fourth quarter by about $3.
The United States was also likely to feel the pain, according to the Energy Information Administration, which warned on Wednesday that it would cost more to heat U.S. homes this winter.
The European Network of Transmission System Operators for Gas (ENTSOG), which monitors security of supply, said a cold winter in Europe would require an increase of gas imports by about 5% to 10% compared to previous maximum levels.
“We’re reaching out to trade partners to discuss if it’s possible to increase their deliveries in the market,” EU energy commissioner Kadri Simson said.
The Commission expects prices to remain high until April 2022.
On Wednesday, China’s most actively traded January Zhengzhou thermal coal futures hit a new high of 1,640 yuan ($254.54) a tonne, a gain of more than 190 percent this year.
Local administrations in Shanxi and Inner Mongolia, two of China’s top coal-producing regions, ordered approximately 200 mines to increase output, but rain flooded 60 mines in Shanxi. In September, China’s coal imports increased by 76%.
In an effort to alleviate the power shortage, Beijing announced that power plants will be allowed to charge business customers market-based prices, reversing a policy that allowed industry to lock in fixed-price electricity contracts with suppliers.