At COP 27, the French President, Emmanuel Macron, made the apostle of the energy transition, proclaiming that the Ukrainian conflict will not postpone the measures necessary to limit global warming. Unfortunately, the realities are all different. Far greater costs will be borne by the world’s poorest countries, which have been squeezed out of the natural gas market by the needs of Europe, caring more about itself than the rest of the world. The reality is that energy security issues in Europe fuel energy poverty in the emerging world.
The strong dollar has only complicated the situation, forcing nations to choose between buying fuel and paying off their debt. Many of these countries’ energy bills have become economically and socially unbearable. An LNG shipment currently costs close to $100 million. For comparison, shipments averaged in 2021 were $33 million. Furthermore, this needs to consider the costs even higher in national currencies.
The damage caused by global warmings, such as the devastating floods in Pakistan, further aggravates a crisis at a time in history when emerging market debt has never been higher. At the same time, Europe is accelerating the construction of NLG terminals to transport more fuel in the future. Germany, Italy, and Finland have secured the plants. The Netherlands started importing LNG from new floating terminals in September. European demand for natural gas is expected to increase by nearly 60% by 2026.
For the first time, emerging countries like Pakistan, Bangladesh, and Thailand are forced to compete on price with Germany or Italy. Consequently, emerging countries have been unable to ensure their energy security due to European competition. India failed in its latest attempt to lock in shipments from 2025. Bangladesh and Thailand have abandoned efforts to secure contracts that would have started in 2026. Pakistan is in the same situation. We are talking about four countries with almost 2 billion inhabitants, almost five times Europe’s population.
Pakistan’s foreign exchange reserves fell to their lowest level in three years last month, pushing the country’s credit rating into limbo. Reserves in Bangladesh, India, and the Philippines are at their lowest in two years. Without Russian gas flowing to Europe, global gas markets will remain tight. Spot prices will remain high, and without the ability to secure long-term supplies, developing countries may turn to more polluting fuels for the long term. The poorest countries will have no choice but to adopt coal and oil, which are much cheaper. They will also seek to develop their national resources. Both of these options will not help improve the situation for the environment. Coal and oil are much dirtier than gas. Extracting new fossil fuels is energy-intensive and linked to increased pollution and seismic activity. Although natural gas is not the ideal solution, it is the cleanest fossil fuel.
The reality is that without Russian gas and hoping for no new crisis, it will take four to five years to stabilize the gas market. In the meantime, the emerging world will probably have taken energy decisions that go against the objective of COP 27. This forum looks increasingly like a high place of human hypocrisy, whose first victim is the planet.