BAKU, Azerbaijan, November 22. While a high price environment can spur investment in the gas industry, it can also lead to demand destruction, particularly in price sensitive markets, Trend reports with reference to the long-term strategy of the Gas Exporting Countries Forum (GECF).
Over the past two years, the global gas market has been significantly impacted by unexpected market shocks, which have sent spot prices from historical lows in 2020 to record highs in 2021 and 2022, punctuated by extreme volatility. Furthermore, such unpredictability and extreme price fluctuations are not desirable for both producers and consumers. These current market conditions have highlighted the increasing importance of efficient contractual practices such as the use of oil-indexed pricing formulae in gas and LNG contracts, aimed at creating price stability and greater predictability, while securing investment in the industry.
Natural gas consumption has steadily increased, driven by the power generation, residential and industrial sectors across all regions of the world. It is the second fastest growing energy source in the last 10 years, after renewables. During the COVID19 pandemic, natural gas proved to be the most resilient hydrocarbon resource. Amidst the rising global energy needs, the expansion of natural gas demand will be supported by economic and policy factors. Natural gas, with its cost and environmental advantages over other fuels (natural gas produces 30% and 45% less CO2 emissions than crude oil and coal respectively), is considered to be the best available solution to displace coal and oil in various sectors and to complement renewables, while supporting the climate agenda. The expansion of the group of gas consuming countries in Africa, Latin America and the Caribbean, and South and Southeast Asia will represent another driver of demand growth, specifically in the power generation and industrial sectors. However, attempts to demonise the use of gas do exist, in particular through the narrative that natural gas is just another fossil fuel and that methane emissions are harmful to the environment.
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