NATURAL gas prices are undergoing a historic surge, and it’s bad news for everyone from ceramic makers in China to customers of patisseries in Paris.

The cost of the fuel is already at record seasonal highs in most major markets and looks likely to rise further, threatening to dent the recovery from the COVID-19 pandemic.

Energy costs are rising around the world as the recovery in demand collides with supply constraints. Oil has already undergone a long rally that started in late 2020 and ended at multi-year highs above US$75 a barrel in July.

Gas began to rise in earnest at the start of summer in the northern hemisphere, when it became increasingly clear that there wasn’t enough supply in Europe to allow the usual refilling of storage sites depleted in winter. The continent’s largest supplier, Russia, has been limiting pipeline exports due for a number of reasons including high domestic demand, and output disruptions.

The coming winter may give the world a lesson in just how pervasive and vital gas has become for the economy. Unaffordable prices could crimp households’ spending and erode their wages through inflation, giving central bankers some difficult policy choices.

Worse still, actual supply shortages could idle swathes of industry.

“Energy lies at the base of an economy,” said Bruce Robertson, an analyst at the Institute for Energy Economics and Financial Analysis. “High energy prices reverberate through the supply chain” and could dent the nascent recovery, he said.(SD-Agencies)