A glob­al ener­gy crunch is send­ing nat­ur­al gas prices soar­ing in the U.K., Europe and Asia, hit­ting record highs. How­ev­er, experts say the stratos­pher­ic prices seen in Europe are unlike­ly to car­ry over to the States.

Much will ulti­mate­ly depend on what the win­ter weath­er brings. But the U.S. is bet­ter posi­tioned head­ing into the cold­er months, giv­en that it’s the world’s largest nat­ur­al gas pro­duc­er and that inven­to­ry lev­els are not as deplet­ed as they are in Europe.

We’re at a unique point in time now where just all ener­gy prices are going up,” Fran­cis­co Blanch, head of glob­al com­modi­ties, equi­ty deriv­a­tives and cross-asset quan­ti­ta­tive invest­ment strate­gies at Bank of Amer­i­ca Mer­rill Lynch, said last week on CNBC’s “The Exchange.” “The U.S. is much more insu­lat­ed from this glob­al ener­gy trend than the rest of the world,” he added.

That’s not to say U.S. prices won’t be volatile. Nat­ur­al gas futures set­tled at their high­est lev­el since Decem­ber 2008 on Tues­day. On Wednes­day, the con­tract trad­ed as high as $6.466 per mil­lion British ther­mal units (MMB­tu).

Nat­ur­al gas for Novem­ber deliv­ery has since eased from that lev­el, but it’s still on track for the sev­enth straight week of gains. The con­tract cur­rent­ly trades around $5.63 per MMB­tu, which is more than dou­ble where prices were at the begin­ning of the year.

But the moves abroad are far more extreme. Ana­lysts at Deutsche Bank not­ed that in Europe prices are up five­fold, while in the U.S. and Asia prices are about 1.5 times high­er. In Europe, the price spike in nat­ur­al gas is equiv­a­lent to if oil were trad­ing around $200 per barrel.

The impor­tance of these moves on infla­tion, growth and exter­nal accounts are not to be under­es­ti­mat­ed,” the firm wrote in a note to clients. “These price moves are a big deal.”

Coal and oil prices are also jump­ing. West Texas Inter­me­di­ate crude futures, the U.S. oil bench­mark, topped $80 per bar­rel on Fri­day for the first time since Novem­ber 2014. Inter­na­tion­al bench­mark Brent crude, mean­while, trad­ed at its high­est lev­el since 2018. Ana­lysts say that ele­vat­ed nat­ur­al gas prices could even prompt util­i­ties to swap the fuel for oil.

Why are prices jumping?

Sev­er­al fac­tors are fuel­ing the price surge in nat­ur­al gas and com­modi­ties such as oil and coal more generally.

Demand is rebound­ing as economies get back to busi­ness and con­sumers return to pre-pan­dem­ic activ­i­ties. At the same time, pro­duc­ers, who suf­fered through 2020′s unprece­dent­ed down­turn, have been slow to hike output.

A cold­er and longer-than-expect­ed 2020 win­ter meant that Euro­pean inven­to­ry lev­els were below aver­age head­ing into the fall. On top of that, slow wind speeds and dry con­di­tions weighed on renew­ables’ ener­gy out­put. Car­bon off­sets are pricey and the con­ti­nent has moved away from coal-fired plants, mean­ing every­one was sud­den­ly com­pet­ing for nat­ur­al gas.

Europe’s gas pro­duc­tion has declined over the last two decades, and the con­ti­nent now depends on imports from Rus­sia. The coun­try has lim­it­ed sup­plies to Europe this year in what some have called a polit­i­cal­ly moti­vat­ed move, although this week Pres­i­dent Vladimir Putin said Rus­sia could boost out­put in an effort to alle­vi­ate the strain in Europe.

Europe is not the only place in need of sup­plies. Asian demand is jump­ing as coun­tries includ­ing Chi­na look to shift away from depen­dence on coal. In some cas­es, car­goes are bypass­ing Europe for Asia, where they can get bet­ter prices.

The Oxford Insti­tute for Ener­gy Stud­ies sum­ma­rized this con­flu­ence of fac­tors, not­ing it cre­ates “this per­fect storm.”

What about in the U.S.?

While the U.S. has its own pow­er prob­lems, as demon­strat­ed in Texas last win­ter when mil­lions of cus­tomers were left in the dark for mul­ti­ple days, the same price jump and ener­gy crunch play­ing out in Europe and Asia is unlike­ly to happen.

″[The U.S.] hasn’t had to rely on the rest of the world to pro­vide its sup­ply, and that’s real­ly what Europe’s prob­lem has been,” said Robert Thum­mel, man­ag­ing direc­tor at Tor­toiseEcofin. He not­ed that the short­age stems not from a lack of sup­ply, but rather from a lack of infra­struc­ture — specif­i­cal­ly for liqui­fied nat­ur­al gas.

You’re not going to see the U.S. to the res­cue here, because there’s just not enough infra­struc­ture on either side — on the U.S. side or the Euro­pean side and most impor­tant­ly on the Asian side — to solve this,” he added.

At the end of the day, Thum­mel said his fore­cast for nat­ur­al gas prices all comes down to weath­er. A nor­mal win­ter could see prices stay slight­ly ele­vat­ed in the $3 to $4 range, while warmer-than-expect­ed tem­per­a­tures could see a retreat to between $2.50 and $3. On the flip side, if tem­per­a­tures drop prices could spike into the dou­ble digits.

While the U.S. is in a bet­ter posi­tion than Europe head­ing into the win­ter, such wild swings in over­seas ener­gy mar­kets do have cas­cad­ing effects around the globe. This week Cred­it Suisse lift­ed its fore­cast for fourth-quar­ter prices by more than 60% — from $3.50 MMB­tu to $5.75 MMBtu.

The near-term set-up around win­ter stor­age inven­to­ries and increas­ing­ly tight glob­al demand fun­da­men­tals have proven more bull­ish than we had antic­i­pat­ed,” the firm wrote in a note to clients. While the new tar­get is ele­vat­ed rel­a­tive to aver­age prices in recent years, it’s still below the $6 lev­el nat­ur­al gas crossed last week.

JPMor­gan, mean­while, raised its 2022 annu­al aver­age price fore­cast by $1.70 MMB­tu to $4.81 MMB­tu in a note titled “Unthink­able upside, lim­it­ed down­side.” The firm point­ed out that it’s atyp­i­cal to adjust fore­casts right before win­ter weath­er reports become avail­able. But this time it was war­rant­ed. Ana­lysts said there was an “absolute need” to adjust fore­casts giv­en the “risks that are plagu­ing this bal­ance at the cur­rent time.”

We go where the US sup­ply and demand bal­ance takes us, and it has tak­en us to a place that hasn’t been vis­it­ed in quite some time,” the firm said. For the cur­rent quar­ter, JPMor­gan envi­sions prices aver­ag­ing $5.50 MMB­tu, which would bring 2021′s aver­age price to $3.65 MMBtu.

While the ener­gy crunch is like­ly the pri­ma­ry dri­ver of the price action, some of the volatil­i­ty could also be from Wall Street firms short­ing futures into the mas­sive ral­ly and sub­se­quent­ly being forced to cov­er positions.