BAKU, Azerbaijan, May 20. Coal and natural gas prices are forecast to increase sharply in 2022 before moderating somewhat in 2023, but remain well above their five-year average, Trend reports with reference to the World Bank.
The WB report reveals that the largest increase is for European natural gas (100 percent), followed by coal (80 percent). The smallest increase is for U.S. natural gas, although prices will be significantly higher than during 2016-21 due to continued strong demand for U.S. LNG exports.
The increase in prices in 2022 reflects disruptions to energy supplies as a result of the outbreak of war in Ukraine and related sanctions and policies, says the report.
“Trade patterns may be sharply altered, pushing up costs. The EU intends to increase imports of LNG by 50 billion cubic meters per day, (about 10 percent of global LNG trade), mainly relying on redirected flows in the short term. Similarly, for coal sanctions will lead to a reshuffling of trade as the EU (and Japan) seek alternative supplies from Australia, Colombia, Indonesia, South Africa, and the United States, while Russian coal may be diverted to India and elsewhere,” the World Bank notes.
The WB experts predict that changes in trade patterns could greatly increase transport costs, as coal is bulky and expensive to ship.
“Natural gas demand is expected to be broadly flat in 2022, as some modest growth in Asia and Africa is offset by large declines in Europe as high prices trigger demand destruction, particularly for industrial and power use in Europe. A subsequent moderation in prices reflects additional supplies coming onstream, changes to consumer behavior, and higher installation of renewable energy sources to generate power, particularly in Europe. Demand for coal will likely continue to be supported in the near term as a substitute for natural gas but medium-term plans in many countries still favor phasing out coal to reduce carbon emissions,” reads the report.
Follow the author on Twitter: @Lyaman_Zeyn