Japan's Nuclear Disaster Is Going To Lead To A Surge In Demand For Gas

by Gregory White

Japan's nuclear disaster indicates that the country, in the immediate term, will be turning to other sources of energy to fill the gap.

New demand for fossil fuels is going to lead to higher gas prices as Japan compensates for its loss in nuclear output, according to Didier Laurens of Societe Generale:

The Japanese nuclear crisis could lead to a prolonged closure of major nuclear plant reactors affected by the earthquake and the tsunami. In a report issued this morning, SG Commodities Research estimate a loss of 52TWh from nuclear output (out of 278TWh in 2010) in 2011 which will have to be compensated by thermal plants, mainly gas (47%) and coal (39%) power, increasing the gas demand by 5bcm in 2011e. Therefore, our colleagues have revised up their gas price forecast for Europe by c.10% from Q2 11 and beyond.

And while oil prices may go down in the short term, after April the market should turn more bullish, according to SocGen analysts.

Putting in perspective Japan's reliance on nuclear, here's a chart showing what's at stake.

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