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The current energy crises has hit hard, and it will have a negative impact on global economies if not contained effectively. The gas crisis hit consuming nations while some major gas producers, who claimed to be influential in gas markets, have been obviously missing.
When oil prices rise, the whole world focuses on OPEC producers to adjust output to alleviate prices. And yet when gas prices rose by about 400%, exporting countries weren’t asked to increase production explicitly and directly.
OPEC manages crude oil markets that are both transported via ships and pipelines. The same should be true of global gas markets which should also be managed by an effective organization for both natural gas which is transported by pipelines, or the Liquefied natural gas (LNG) that is transported via ships.
Both natural gas and LNG markets need to be regulated as the two are needed to ensure energy security; they’re used for generating electricity, especially during periods of high demand for heating and cooling.
The spread of COVID-19 worsened this trend and presented the LNG industry with a demand shock like no other in its history in 2020, which caused many LNG cargoes from the US to be canceled by buyers from Europe and Asia. That led to a huge supply glut. Unlike the oil sector, the world’s leading gas exporters have been producing at will without a collaborative organization that effectively organizes and regulates production in line as demand needs.
If there was an organization to manage the global gas markets like “OPEC,” we wouldn’t see a looming energy crisis sparked from the extremely tight global gas markets and astronomical price levels. On the other hand, OPEC+ producers made the largest oil supply cut in history of nearly 10 million barrels per day and survived the global oil markets.
If OPEC+ was regulating global gas markets, there wouldn’t be many countries terrified of the coming of winter, racing to store gas amidst fears of an extremely colder winter and depleted gas inventories resulting from greater home heating demand for longer than usual at the beginning of the year.
There is an organization—the Gas Exporting Countries Forum (GECF)—that was established in 2001, but it’s aim isn’t the stability of the gas market as such, though its members control more than 70% of the world’s natural gas reserves, 46% of its marketed production, 55% of pipelines and 61% of LNG exports globally. The GECF needs to be transformed into an effective organization with an agreed charter that regulates supplies as demand dictates.
The global gas markets must have already acknowledged the strategic role of OPEC in regulating global oil markets. OPEC producers do not target a certain price ceiling, but the primary goal is to balance and stabilize oil markets with a successful mechanism that everyone benefits from: producers, oil industry and oil customers. The cooperation charter in OPEC + is not limited to the balance of oil markets only, but goes beyond that, which is cooperation in multiple fields.
Having a regulator for the global gas markets requires having a swing producer like Saudi Arabia which is the largest oil exporter with the greatest spare capacity and has successfully led oil producers by example with tireless efforts to balance the markets.
Saudi Arabia is the only swing producer, a safety valve for global energy supplies that has proven its ability to maintain balanced global oil markets, in various situations, absorbing any sudden shocks that occur as a result of geopolitical or technical factors.
Russia and the United States
