Spikes in natural gas prices in Europe and in some major Asian markets have pushed up electricity prices and brought hardships to households and businesses. As our Executive Director Fatih Birol points out in this recent article, it is necessary to properly understand the causes of these increases before drawing the correct lessons for the future. Contrary to the false claims some people are now making, policies to encourage the transition to clean energy are not to blame for the turmoil in gas and electricity markets.
As we highlighted in our recent World Energy Outlook 2021, well managed clean energy transitions can reduce the risks of energy market volatility and its impacts on businesses and consumers. The underlying causes of today’s gas market crisis lie in last year’s exceptionally rapid global economic rebound, outages, supply bottlenecks and maintenance of key gas infrastructure. We are also seeing insufficient supply from Russia, which appears to have created “artificial tightness” in European gas markets by reducing its exports by about a quarter from a year earlier despite record high market prices.