"At present, the EU is in line with the energy policy of the US, which does not seek to strengthen Europe and strives to deepen [the bloc's] dependence on American oil and liquefied natural gas (LNG). Since the beginning of the shale revolution, the US has been interested in diversifying its oil and gas supplies and arbitrating prices between the EU and the Asia-Pacific region," said Pavel Katyukha, associate professor of the Department of Oil and Gas Trading and Logistics at Gubkin Russian State University of Oil and Gas.
Katykha believes that during the next two or three years, Europe will face an energy crisis. According to him, this crisis could end in the collapse of the entire European economy, which was built on cheap Russian energy resources.
"LNG and natural gas from Qatar, Algeria and other countries will not be able to replace cheap Russian gas either in terms of price or volume," the academic noted.
Qatar’s Energy Minister Saad Al-Kaabi on October 30 told an American broadcaster that the EU would face economic difficulties up until at least 2025, if winters are harsh and Russian natural gas flows don’t return to previous levels. Al-Kaabi, who is also CEO of Qatar Energy, further warned Brussels against capping natural gas prices, explaining that it could prompt gas producers to turn to other energy importers. "The free market is always the best solution," the Qatari energy minister insisted, adding that interfering in markets clearly contradicts the free market rules that Europe has previously applied to producers.
Al-Kaabi was right to draw attention to the fact that the EU's price-capping initiative contradicts the bloc's own rules, according to Katyukha.
"In accordance with the International Energy Charter and the third energy package, the EU is pursuing a policy of gas market liberalization, which involves the formation of a fundamentally new architecture of the gas market with the integration of individual local hubs, the transition to market pricing from long-term contracts to spot (market) pricing, the possibility for consumers to choose a supplier, third party access and division of functions of market operators," the Russian academic said.
In addition to that, the EU's decision to follow in the footsteps of the US and the UK by severing ties with Russian energy producers, most notably Gazprom, could backfire on gas markets.
"The break-up with the world's largest gas supplier (Gazprom) will cause an imbalance in the global gas market – disruption in the balance of supply and demand – and price imbalances at the main global gas hubs, i.e. North America (Henry Hub), Great Britain (National Balancing Point), Europe (TTF). LNG producers will not be able to compensate for the shortage of about 100 billion cubic meters of gas per year. The outflow of LNG from the Asia-Pacific region will further aggravate the imbalance in the global gas market," warned Katyukha.
Gas producers have repeatedly warned against the politicization of energy trade, which is destabilizing markets and accelerating global inflation. They fear that the West's price capping of Russian hydrocarbons could paralyze global trade. Earlier, Al-Kaabi called on all countries and multilateral organizations to depoliticize oil and gas trade, calling for abandoning sanctions and policies crippling the free market. The Qatari energy minister's comments came ahead of the 24th Ministerial Meeting of the Gas Exporting Countries Forum (GECF) which was held on 25 October 2022 in Cairo, Egypt.
The energy industry players are right, according to Katyukha:
"The world market needs to reform the existing oil and gas pricing system and create benchmarks based on a transparent market pricing system. The Kingdom of Saudi Arabia, Qatar, China, India, Russia, others are interested in such a reform," the academic concluded.