Asia’s energy security trumps green push

THE Russia-Ukraine war has upended global energy markets, with the impact felt most by Europe, which is heavily dependent on Russian natural gas, oil and coal. However, given the nature of energy markets, the repercussions reverberate across the globe, including in Asia.

Reduced Russian pipeline gas flows to Europe have meant that Europe is having to rely more on liquefied natural gas (LNG), and in so doing is competing against Asia for the supply. This has tightened LNG supply and pushed up LNG prices in Asia. In addition, the sanctioning of Russian oil and coal by Europe has meant that European buyers are looking elsewhere for energy supplies. While some Asian buyers, such as China and India, may be willing to take advantage of the large discounts available for Russian fossil fuels, this is not true for all Asian countries. For example, Japan and South Korea appear to be moving away from Russian fossil fuels.

What has made matters worse for a number of key importers is that not only are we seeing higher fossil fuel prices, but the strength of the US dollar has meant that the pain from higher prices is even more acute.