Natural gas prices have increased since the Russian military operation in Ukraine began. After months of fights and threats, Russia decided to cut the service due to alleged leaks in the Nord Stream Two gas pipeline, which is still closed.
This situation has increased the value of fossil fuel as winter is approaching, and there are still no effective solutions to help the European continent. Only an energy reduction plan that is insufficient for the demand is foreseen.
But how does this shortage impact Latin America?
In the region, the largest producers of this product per day during the last year were:
- Brazil, with 1,401 million cubic meters;
- Mexico, with 1,199 million cubic meters;
- Colombia, with 541 million cubic meters;
- Venezuela, with 471 million cubic meters;
- Ecuador, with 362 million cubic meters;
- Guyana, with 73 million cubic meters;
- Trinidad and Tobago, with 53 million cubic meters.
This scenario could have both positive and negative effects in the region thanks to the fact that the hydrocarbon could be exported from countries such as Brazil and Mexico; however, since it is the main raw material for fertilizers, it would trigger an increase in food prices.
Latin America stands out for being a commodity-exporting region with little exposure to Europe, so it has benefited from the rise in the prices of raw materials such as oil; however, there is still a risk of a reduction in demand due to the possibility of a global recession.
“The most certain thing is that a large part of the gas produced globally will be taken to Europe, which is why it will start to become a fundamental commodity for reactivation and to maintain Latin American economies,” said Victor Mijares, professor of Political Science and Global Studies at the Universidad de los Andes.
The value of this type of input is projected to continue to increase, affecting the availability of energy and gasoline in much of Europe and creating an unfavorable environment for food, especially in the region.
The war between Russia and Ukraine has impacted most countries, especially European nations, which depend on around 40% of the supply from Russia, equivalent to 72% of hydrocarbon exports.
Russia is the second largest gas producer in the world, with a production of 701 billion cubic meters per year. The first is the United States, with 934,200 million cubic meters per year, while the third is Iran, with 256,700 million cubic meters.
As for oil, on October 7, it managed to recover after considerable falls. West Texas Intermediate (WTI) rose 1.75%, trading above US$78 a barrel, while Brent rose 2.08% to US$86 on average.
The rebound in crude oil prices is due to the sharp rise in the dollar, which, despite trimming the gains of previous days, remains at high levels against other economies. In addition, the possible supply cut due to the passage of Hurricane Ian also influenced crude oil prices.
“Oil is currently under the influence of financial forces,” said Tamás Varga, an analyst at oil broker PVM. “Meanwhile, relief rallies, such as the one this morning triggered by Hurricane Ian in the U.S. Gulf, are considered temporary phenomena,” he added.
With information from El Economista