All eyes have been on oil but gas is back so who will bet on it?

From the onset of the Covid-19 pandemic, the energy sector's attention has been focused on oil market turbulence and emerging green energy technology.

Another key energy source has endured a dull decade. But as it sets price records and is tangled up in geopolitics, gas is back.

US gas prices have been low for more than a decade. They crashed during the financial crisis of 2008 and, since then, the torrent of shale gas has kept them almost always below $3 per million British thermal units (Btu), the equivalent of $17 for a barrel of oil. Numerous companies began projects to export liquefied natural gas to the rest of the world to ease the surplus.

Prices elsewhere have been higher but generally restrained. Asian LNG prices, by convention mostly determined by reference to oil, dropped along with crude in late 2014 and generally hovered between $5 and $10 per million Btu.

There was a crisis over Russian supplies to Europe via Ukraine after Moscow’s annexation of Crimea in 2014, but this did not cause real shortages, unlike the cut-off of 2009.

China announced a policy to reduce pollution by switching from coal to gas, especially for home heating, and its imports of LNG and gas by pipeline from Central Asia and Russia increased.

Overall, a world which had worried about running out of gas in the early 2000s, as with oil, became accustomed to abundant, inexpensive gas as a fact of nature. The main debate has not been over price or availability but what place gas should have in the necessary transition to low-carbon energy.

This period of complacency may now be ending, driven by three factors: rising demand, a hiatus in supply and the Kremlin.

During the initial onset of the Covid pandemic, gas was not as badly hit as oil. While transport ground to a halt, people still needed to heat and light their home offices and power their Zoom calls. Last April, Asian LNG did fall to a record low at $1.825 per million Btu. But by this January, it had rebounded to a high of $32.50, about $190 per barrel of oil equivalent, a higher level than crude has ever reached.

The take-up of LNG in Asia to cut pollution and meet domestic shortages is mostly a Chinese story. China will probably overtake Japan this year as the world’s biggest buyer of the fuel. Still, India, Pakistan, Bangladesh and Thailand are also important hotspots of new demand. Drought in Brazil, which has cut hydropower output and sent the nation scurrying for LNG cargoes, is another climatic factor.

Extreme cold drove up prices last winter but an Asian heatwave and air-conditioning demand has kept the market hot through the usually softer summer season. Strong prices for coal and European carbon permits keep gas attractive despite its rising cost.

Supply has been struck by some unexpected accidents and by a shortage of new project approvals during the fallow years. Falling US shale oil production has also reduced the output of by-product associated gas, helping push its Henry Hub benchmark to $4.41 as of Friday – well above the $2.65 it has averaged since the 2014 oil price slump.

Norway’s Snohvit LNG plant will be out for a year and a half after a fire in September. Egypt, Algeria, Nigeria, Australia, Russia and the US have been underproducing because of various technical problems and pandemic-related maintenance deferrals.

The Netherlands’ pivotal Groningen gasfield is moving towards closure by 2023 because of persistent earth tremors.

In terms of future supply, new LNG export plants in Canada and Mauritania-Senegal have been delayed by the coronavirus, and insurgency in Mozambique has halted two large new projects, pushing them back beyond 2025.

Then there is the most enigmatic factor, Russia. State export monopoly Gazprom has cut supplies to Europe, claiming it needs to meet domestic demand and refill its inventories. A fire at its giant Urengoy processing plant earlier this month has also cut output.

But there are suspicions that Moscow has also deliberately held back supplies to put pressure on Europe over its nearly completed Nord Stream II pipeline. The US and Germany reached an agreement in July to avoid sanctions over the project in return for stronger support for Ukraine, which the pipeline is intended to bypass.

President Vladimir Putin warned Europe it had to indicate how much Russian gas it wanted through Ukraine after the current contract expires in 2024, and said Kiev should show “goodwill” to keep gas flowing. The drop in Russian exports means European gas storage is at decade lows, at the time that it would normally be filling up in preparation for winter.

Relief is on the way. LNG plants will come back from maintenance, and Europe could fill its storage in time if October weather is warm. The Northern Hemisphere winters of 2021-2022 and 2022-2023 could still be vulnerable to supply squeezes. That is bad news for the climate, if it sustains coal in Europe and the US, and puts off Asian countries from further retiring the dirty fuel.

From the mid-2020s, gas from major new LNG projects in the US, Russia, Qatar, East Africa and Australia is expected to reach the market. The growth of competitive renewable energy will increasingly eat into the power generation market, particularly in Europe and, perhaps, the Middle East.

Meeting climate targets will challenge gas use unless industries and power plants are fitted with carbon capture and storage systems. However, the production of “blue” hydrogen and the power needs of electric vehicles can be sources of new demand.

That is for the future. For now, the expectation of governments and consumers for permanently abundant and cheap gas has been a little shaken. Yet, with long-term demand and competition so cloudy, only bold companies will jump headlong into big new investments.

Robin Mills is chief executive of Qamar Energy and author of The Myth of the Oil Crisis