Gold 
“With the global push toward cutting carbon emissions, it’s tough to imagine a setback that would lead to a shift from a cleaner-burning fuel to oil. But that’s what may happen, with United Kingdom natural gas touching record highs, and U.S. prices more than double this year, and at their highest since 2008.
“The current energy crisis is a perfect storm of overlapping events that were sparked off by the Covid pandemic, and essentially boils down to a lack of stockpiling,” says Sanjeeban Sarkar, commodities editor at The Economist Intelligence Unit, or EIU. In Europe, natural-gas prices spiked because of a slowdown in supplies, higher demand from a hotter-than-expected summer, and lower energy output from wind turbines, which raised demand for natural gas as an alternative, he said. That “all but wiped out” natural-gas stocks.
On Oct. 5, U.K. natural-gas futures jumped to a record high at 302.84 pence a therm, and U.S. natural-gas futures settled at $6.31 per million British thermal units, the highest since December 2008. Prices for both benchmarks have eased a bit from those highs after Russian President Vladimir Putin said on Oct. 6 that his country would boost supplies to Europe.
“You are seeing an economic incentive…to switch away from natural gas” to petroleum products such as distillates and liquid petroleum gas, says Rich Redash, head of global gas planning at S&P Global Platts Analytics. Energy-intensive industries, such as primary-metal manufacturers, may look to “flip-flop between coal and gas, or gas and various petroleum products.”
High prices already have hurt the share of natural gas in power production, says Sarkar of the EIU, which expects the share of natural gas used in electricity generation to fall by 8.3%, to 35% this year, and to 34% in 2022, as the “share of renewables rises.”
Liquefied natural gas, or LNG, and oil are substitutes for natural gas, but LNG is now expensive relative to oil, and it’s “cheaper to burn fuel oil in power plants than natural gas,” says Anas Alhajji, managing partner at Energy Outlook Advisors.
He points out that with power shortages around the world, “factories and people resort to private [power] generation,” which uses fuel oil and diesel, implying an uptick in petroleum product demand.
Coal, meanwhile, has also become more expensive, with prices delivered to Europe hitting a record high of $295.05 per metric ton on Oct. 5, and thermal coal shipped to northeast Asia at $156.59 per metric ton, almost $97 higher than about a year ago, as assessed by S&P Global Platts on Oct. 6.
“Spot coal prices have risen to all-time highs in Asia, as spot coal supply availability is extremely limited,” says Andre Lambine, senior analyst, European gas & power analytics at S&P Global Platts.
When it comes to coal, China has “set the pace of recent price increases,” says Reid I’Anson, senior commodity economist at data and analytics provider Kpler, pointing out that Chinese thermal coal imports were at a five-year high in August. That “did little to keep up with the pace of domestic demand,” with combined thermal coal inventories across seven provinces that publish data finishing August at the lowest levels since early 2018, he says.”
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