How much hot air is in the gas debate?

The energy price “debate” and demands that the government do something about soaring gas prices here are occurring against a peculiar international backdrop.

European natural gas futures, the benchmark price level for the EU and the rest of Europe, briefly fell into a negative position on Monday. They’re down 20% in the past week — and 70% from their highs in late August.

But what about the impact of Putin’s invasion of Ukraine?

Well, Europe’s plans to wean itself off Russian gas are working: Europe now has 94% of its winter gas needs covered (in the past five years at this point it’s averaged 87%). At least 88 LNG tankers — most from the US — are waiting to unload at the few gas terminals Europe has, or are sailing slowly to them to soak up time, or waiting to leave ports in the US and Middle East and sail for Europe. There’s so much gas that the European grid was briefly oversupplied — the reason why prices briefly went negative.

Mild autumnal weather across much of Europe is also helping, CNN quoted Massimo Di Odoardo, vice president of gas and LNG research at Wood Mackenzie, pointing out “in countries like Italy, Spain, France, we’re seeing temperatures and [gas] consumption closer to August and early September [levels]. Even in countries in the Nordics, the UK and Germany, consumption is way below the average for this time of the year,” he added.

Crucially, the surge in supplies to Europe is not a one-off to replace Russian gas this year. Russian gas’ role in European energy supplies is finished. Putin thought he had a weapon to force Western acquiescence. Instead, he’s killed off a major support for a Russian crony capitalist economy that even before sanctions was ageing, sclerotic and riddled with corruption.

American — and to a lesser extent some Middle Eastern — suppliers have established themselves in Europe as major swing exporters of gas. for which they’re undoubtedly very grateful to Putin. Australia’s Woodside is also a growing supplier to stricken German gas giant Uniper.

Gas shipments need infrastructure, and the surge in shipments to Europe will see more receiving terminals and pipelines built or reoriented to Europe, and more export terminals built in the US. Within a couple of years, a US gas “pipeline” across the Atlantic will have been established that will make a return to Russian gas out of the question.

Many of the US gas cargoes have been diverted from Asia, but gas prices in northern Asia have also fallen sharply since the sudden surge in late August; they are down more than 40% compared to the last days of August. Like Europe, much of Asia is facing a warmer than usual winter — the product of La Niña in the Pacific, which will push the jet stream further south in North America and bring colder conditions to the mid-west and north-west, but drier, warmer conditions elsewhere.

But here, gas prices are set to go up, and up, and up: an average of $16 per gigajoule in 2023, from $8 per gigajoule, according to Australian Competition and Consumer Commission figures. Domestic buyers are being offered gas up to $25 per gigajoule.

If, as we’re always being told, gas prices here are dictated by the export prices for east-coast gas supplies, why isn’t the falling global price of gas showing up in current and future prices here?