An escalating dispute at major gas facilities in Australia could drive up European prices, analysts say
Liquefied natural gas (LNG) storage units at Grain LNG importation terminal, operated by National Grid Plc, on the Isle of Grain on August 22, 2022 in Rochester, England.
Dan Kitwood | Getty Images News | Getty Images
The looming threat of strikes at Australian natural gas facilities will keep global gas markets on tenterhooks, energy analysts told CNBC, with traders fearing that a prolonged halt to production could squeeze global supplies and send European prices higher.
U.S. energy giant Chevron and unions representing workers at the Gorgon and Wheatstone projects in Western Australia are in daily talks this week to try to come to an agreement over pay and job security. The Fair Work Commission, Australia’s independent workplace relations tribunal, is mediating talks between both sides.
If a deal cannot be agreed, the strikes are scheduled to begin from 6 a.m. local time Thursday. The long-running dispute escalated even further on Tuesday as a union alliance announced plans to strike for two weeks from Sept. 14.
“In response to Chevron’s [duplicitous] claim that our EBA negotiations are ‘intractable’, the Offshore Alliance is escalating Protected Industrial Action to [demonstrate] that our bargaining negotiations are far from ‘intractable,'” the Offshore Alliance said in a Facebook post.
“Offshore Alliance members are yet to exercise their lawful workplace rights to take Protected Industrial Action and our bargaining claims will look more and more reasonable as Chevron’s Gorgon and Wheatstone LNG exports dry up.”
In response, a Chevron Australia spokesperson told CNBC, “We’re looking to narrow points of difference with Gorgon and Wheatstone downstream employees and their representatives through further bargaining mediated by the Fair Work Commission.”
There is so little flexibility in the market that the slightest provocation will cause large changes to the prices.
Jacob Mandel
Senior research associate for global energy markets at Aurora Energy Research
Fears of strike in Australia, one of the world’s biggest exporters of liquified natural gas (LNG), have recently pushed up European gas prices — and analysts expect near-term volatility to persist.
Jacob Mandel, senior research associate for global energy markets at U.K.-based consultancy Aurora Energy Research, said the global natural gas market was currently “very tight” and “very little supply flexibility” means that strike action in Australia could send European gas prices higher.
“Prices have moved quite significantly on basically little bits of news on what’s happened to these two facilities because there is so little flexibility in the market that the slightest provocation will cause large changes to the prices,” Mandel told CNBC via videoconference.
He said that European gas prices could climb to above 40 euros ($42.9) per megawatt hour if the strikes go ahead as planned. The front-month gas price at the Dutch Title Transfer Facility (TTF) hub, a European benchmark for natural gas trading, traded at 33.5 euros on Tuesday.
The TTF contract rose sharply to around 43 euros last month. TTF prices have since pared gains, however, and remain well below last summer’s extraordinary spike to more than 300 euros.
“I think it is extremely unlikely prices will go anywhere near where they were last September, where they hit these massive record peaks,” Mandel said. “Prices reached those peaks under extraordinary circumstances, which in theory could have been replicated. However, in Europe, we’ve taken many steps that could keep prices from reaching such a high.”
“It doesn’t mean that prices could increase above this 40 per megawatt hour level and if something else happens — a sudden winter storm, or something like this — certainly this can push [prices] higher,” he added.
Kaushal Ramesh, head of gas and LNG analytics at research firm Rystad Energy, said looming industrial action at Chevron’s Gorgon and Wheatstone facilities suggested near-term volatility could continue until a resolution is reached.
“We still don’t think there will be a material impact on production,” Ramesh said, citing the resolution of other similar disputes. He noted that it may become difficult for Chevron to prolong the strikes if they do go ahead.
“Whatever monetary impact there may be to Chevron from giving in to the workers’ demands is likely a fraction of lost revenue if production were to be substantially impacted,” Ramesh told CNBC via email.
“Thus, these are political developments, and things can get irrational, but so far, Asian buyers have not been too concerned. This winter, Japan and Korea will have an additional 6 GW of nuclear power available compared to the previous year.”
Another ‘big question mark’ for Europe
Wild price swings in energy markets in recent weeks come as the euro zone continues to wean itself off Russian fossil fuel exports following the Kremlin’s full-scale invasion of Ukraine.
Last month, the EU hit its target of filling gas storage facilities to 90% of capacity roughly two-and-a-half months ahead of schedule, bolstering hopes the bloc has secured enough fuel supplies to keep homes warm during winter. Nonetheless, the region’s gas market remains sensitive.
“Europe’s gas markets remain nervous, as seen in the jump in prices in August at the threat of an LNG worker strike in faraway Australia,” said Henning Gloystein, a director for energy, climate, and natural resources at political consultancy Eurasia Group.
“Real disruptions” are possible this winter, Gloystein said, including Norwegian winter storm outages or a cut of the remaining Russia gas to Europe. He warned that a stoppage of pipeline transit via Ukraine or a suspension of Russian LNG shipments were two notable risks for Europe.
One “big question mark” adding a risk premium to costs in Europe, Mandel said, is the future for the transit of Russian gas through Ukrainian territory, which is scheduled to expire at the end of next year.
Oleksiy Chernyshov, the chief executive of Ukraine’s largest oil and gas company Naftogaz, told CNBC in mid-August that the Russian gas transit agreement “is actually quite a complex issue.”
“I just wanted to make very clear Ukraine is servicing this transit actually in favor of European Union countries that are consuming Russian gas,” Chernyshov said. “We clearly understand that some of the countries cannot immediately get rid and stop consumption because they need it for the preparation for the winter.”
A spokesperson for the European Commission, the EU’s executive arm, told CNBC that the gas transit agreement is “still a long way from now” and they cannot speculate on what the situation would like in 18 months’ time. “It is also not for us to speculate nor comment on the two parties’ interest for a renewal of such contract,” they added.
The spokesperson said under the EU’s REPowerEU plan, the bloc’s objective is to “completely phase out Russian fossil fuel imports as soon as possible.” They noted that Russian gas now represents less than 10% of the EU’s pipeline imports, compared to roughly 50% before the energy crisis spurred by Russia’s full-scale invasion of Ukraine.
In the US in 2024, wind and solar accounted for 17% of total electricity generation, surpassing coal, which fell to a record low of 15%, according to a new report from global energy think tank Ember.
Since US coal power peaked in 2007, wind and solar have overtaken coal in 24 states, with Illinois the latest to join the ranks in 2024, following Arizona, Colorado, Florida, and Maryland in 2023, the report finds. It’s the first analysis of full-year US electricity data, which was published by the EIA on February 26.
After being stagnant for 14 years, electricity demand started rising in recent years and saw a 3% increase in 2024, marking the fifth-highest level of rise this century. The increase in demand and fall in coal was met with higher solar, wind, and gas generation. Natural gas grew three times more than the decline in coal, increasing power sector CO2 emissions slightly (0.7%). Coal fell by the second smallest amount since 2014, as gas and clean energy growth met rising electricity demand, whereas historically, they have replaced coal.
Despite growing emissions, the carbon intensity of electricity continued to decline. The rise in power demand was much faster than the rise in power sector CO2 emissions, making each unit of electricity likely the cleanest it has ever been.
Solar grew faster than natural gas
Solar generation rose by 64 TWh in 2024, compared to natural gas, which rose 59 TWh. It remained the fastest-growing source of electricity, with its generation rising by 27% in 2024, surpassing hydropower generation for the time. It made up 81% of all new annual power capacity additions in the US. Gas added no net capacity, as new plants were offset with closures.
California and Nevada both surpassed 30% annual share of solar in their electricity mix for the first time (32% and 30%, respectively). California’s battery growth was key to its solar success. It installed 20% more battery capacity than it did solar capacity, which helped it transfer a significant share of its daytime solar to the evening. Texas installed more solar (7.4 GW) and battery capacity (3.9 GW) than even California. Yet the growth of solar was uneven – 28 states generated less than 5% of their electricity from solar in 2024, highlighting significant untapped potential – even before adding battery storage.
As solar grew massively, wind saw a modest 7% increase in generation, adding the least capacity in 10 years. However, it still generated 50% more power than solar in 2024, making 10% of the US electricity mix.
Solar and wind can meet rising demand
With the adoption of EVs, air conditioning, heat pumps, and rapid expansion of data centers, demand for electricity is guaranteed to grow in the coming years.
To meet the rise in demand, clean generation needs to grow faster. Unlike solar, wind’s growth has been slow. Clean energy is able to meet rising electricity demand alone – without raising bills, sacrificing security of supply, or further relying on gas.
“As the demand remained unchanged for years, solar, wind, and gas together worked to replace coal, transforming the US electricity system,” Dave Jones, chief analyst at Ember, said. “But now that electricity demand is rising fast, the battle is between solar and gas to meet this. And solar is winning – it added more generation than gas in 2024, and batteries will ensure that solar can grow more cheaply and quickly than gas.”
Daan Walter, principal at Ember, said, “Electricity demand is rising as new uses emerge across the US economy, from data centers to transportation and heating. This makes the case for solar and wind today even stronger – they are not only fast to deploy and cheap but also help stabilize energy costs in the long run.”
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Elon Musk said today that Tesla will double its electric vehicle production in the US in the next two years.
What would that look like? Let’s do the math.
Today, during a press conference to promote Tesla at the White House, Tesla CEO Elon Musk said the following:
“As a function of the great policies of President Trump and his administration, and as an act of faith in America, Tesla is going to double vehicle output in the United States within the next two years.”
This raises many questions, as Musk’s phrasing of the statement suggests that Tesla is planning to add previously unannounced production capacity in response to Trump’s policies.
However, the reality could be different.
What is Tesla’s current production capacity in the US?
We only know Tesla’s installed capacity, which is much different than its actual production rate.
This is Tesla’s latest disclosed global production capacity at the end of 2024:
| Region | Model | Capacity | Status |
|---|---|---|---|
| California | Model S / Model X | 100,000 | Production |
| Model 3 / Model Y | >550,000 | Production | |
| Shanghai | Model 3 / Model Y | >950,000 | Production |
| Berlin | Model Y | >375,000 | Production |
| Texas | Model Y | >250,000 | Production |
| Cybertruck | >125,000 | Production | |
| Cybercab | — | In development | |
| Nevada | Tesla Semi | — | Pilot production |
| TBD | Roadster | — | In development |
In the US, it adds up to 1,025,000 vehicles per year.
In reality, Tesla’s factories are operating at a much lower capacity.
Based on sales and inventory from 2024, Tesla is currently building fewer than 50,000 Model S/X vehicles per year compared to an installed capacity of 100,000 units.
As for Model 3 and Model Y, Tesla is currently building them in the US at a rate of about 600,000 units per year compared to claimed installed capacity of over 800,000 units.
Finally, the Cybertruck is being produced at a rate of less than 50,000 units per year compared to an installed capacity of over 125,000 units.
This adds up to Tesla producing 700,000 units per year in the US in 2024.
What will be Tesla’s new capacity?
Considering Musk mentioned that it will happen “within the next two years”, it is unlikely that he is referring to installed capacity.
The CEO is most likely talking about Tesla’s actual production, which would also make sense, especially considering he mentioned “output.”
Tesla currently outputs roughly 700,000 vehicles per year in the US.
Doubling that would mean bringing the total to 1.4 million units per year, which would be an incredible feat, but it’s not entirely a new plan for Tesla.
First off, Tesla has already announced plans to unveil two new, more affordable models this year. These models are going to be built on the same production lines as Model 3/Y, which would potentially enable Tesla to fully utilize its installed capacity for those vehicles.
That’s another 200,000 units already.
As already mentioned in Tesla’s installed capacity table, the company is currently developing its production facility for the Tesla Semi electric truck in Nevada.
Production is expected to start later this year and ramp up next year. Tesla has previously mentioned a goal of 50,000 units per year. It would leave Tesla roughly a year and half to ramp up to this capacity, which is ambitious, but not impossible.
Then there’s the “Cybercab”, which was unveiled last year.
The Cybercab is going to use Tesla’s next-gen vehicle platform and new manufacturing system, which is already being deployed at Gigafactory Texas.
Production is expected to start in 2026, and Musk has mentioned a production capacity of “at least 2 million units per year”. However, he said that this would likely come from more than one factory and it’s unclear if the other factory would be in the US.
Either way, Tesla would need to ramp up Cybercab production in the US to 450,000 units to make Musk’s announcement correct.
It’s fair to note that all of this was part of Tesla’s plans before the US elections, Trump’s coming into power, or the implementation of any policies whatsoever.
Electrek’s Take
Based on my analysis, this announcement is nothing new. It’s just a reiteration of Elon’s plans for Tesla in the US, which were established long before Trump came to power or even before Elon officially backed Trump.
It’s just more “corporate puffery” as Elon’s lawyers would say.
Also, if I wasn’t clear, we are only talking about production here. I doubt Tesla will have the demand for that, especially if Elon remains involved with the company.
The Cybercab doesn’t even have a steering wheel, and if Tesla doesn’t solve self-driving, it will be hard to justify producing 450,000 units per year.
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The average incentive package for a new EV was 14.8% of the average transaction price (ATP), or approximately $8,162, the highest level in more than five years, according to the latest monthly new-vehicle ATP report from Cox Automotive’s Kelley Blue Book.
Incentives for EVs are more than twice the overall market. A year ago, EV incentives were 10.2%. EV incentives, as a percentage of ATP, have increased by 44% in the past year.
In February, at $55,273, new EV prices were lower by 1.2% from January – generally aligned with the industry – and higher by 3.7% year-over-year. The January EV ATP was revised higher by 0.06% to $55,929.
Compared to the overall industry ATP of $48,039, EV ATPs in February were higher by 15.1%, an increase from the 14.9% gap recorded in January.
EV market leader Tesla increased ATPs by 1.8% year-over-year in February to $53,248 but decreased by 3.7% month-over-month from $55,315. Model 3, Model Y, and Cybertruck posted price declines in February compared to January; Model S and Model X saw month-over-month increases.
As sales cooled, the Cybertruck ATP in February dropped by more than 10% from January to an estimated $87,554.
Read more: You can lease a 2025 Polestar 3 for the same price as a Polestar 2 right now
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