Escalating tensions in the Middle East are once again set to increase global liquefied natural gas (LNG) prices, which raises questions on whether it is a good bridge fuel to the transition to clean energy, especially for importers like India, according to a new briefing note by the Institute for Energy Economics and Financial Analysis (IEEFA).
The note highlights that while various factors govern commodity prices, geopolitics has been the dominant driver of volatility in recent years. The note compares the volatility (Figure 1) in various commodity prices as well as stock market indices and finds that the sharpest moves have been for LNG prices.
“LNG price fluctuations have been extreme in months of minimum variability for other commodities, such as in October 2023 when LNG price jumped by 21%, only to drop by 29% in December 2023,” said the note’s author, Purva Jain, Energy Specialist, Gas & International Advocacy, IEEFA.
On 18 October 2024, spot gold prices touched a record high of US$2,696.78 per ounce (or Rs80,970.27 per 10 grams). Similarly, oil prices have shown signs of stress as geopolitical tensions increase, reaching US$90 per barrel (bbl) on 4 April 2024, before easing over the northern summer months due to the subsiding of geopolitical tensions.
