This is exchanges at Goldman Sachs and I'm Allison Nathan a senior strategist in Goldman Sachs research.

Natural gas prices are hitting record highs across Europe

with supply shocks gathering steam globally.

For this week's episode I'm speaking with my colleague Damian Cuervolin who leads energy research in our commodities team to discuss the outlook for natural gas and other commodities and the potential impact on inflation and economic growth.

Damian, welcome to the program.

Thank you, Addison, for having me.

So again, we are seeing these soaring prices for natural gas.

They're now at record high levels in Europe.

Give us some context.

How did we get here?

We got here both because of demand and supply.

When you think about the COVID recovery,

it's been uneven.

And when you think about oil demand we've seen a clear

underperformance with people not flying but that's actually the opposite in terms of

power demand we are at record power demand levels China alone for example is consuming 13% more power year to date

than last year. And that's because when you think about this economic recovery less services more industry more people

working from home that's on more demand for electricity now of course supply has

contributed as well you know we've seen disruptions in coal production in

countries like Colombia, a decline in coal capacity in China years in the

making, and also disruptions on the gas side coming from countries like Australia or Russia. So it's really the confluence of those demand forces and supply forces which have left the global gas landscape facing record low inventories ahead of its peak

seasonal demand in the winter.

...