The world energy crisis began in summer of 2021 and continues to this day. Gas quotations in the largest markets flew up that negatively affected development of gas engine direction in such regions as Europe and China. At the same time, the prospects for electric cars are not as bright as before the crisis.

We will start conversation on the markets of alternative motor fuels with the unexpected: from the next medium-term forecast of the International Power Agency (IPA). «World demand for gas will grow on average for 1.6% a year during the period from 2022 to 2026 in comparison with an average value of 2.5% a year during the period from 2017 to 2021, — says the Medium Term Gas Market Report 2023. In the report it is noted that the beginning of the global energy crisis in 2022 caused by invasion of Russia into Ukraine opened a new era for the world gas markets after a decade of their active growth during the period from 2011 to 2021″.

Earlier we have already noted that experts of IPA since 2021 have been acting not so much as analysts but as soldiers of information war. Yes, we weren’t wrong — since 2021, the summer in which the global energy crisis began and by September we had to come up with excuses as to why Europe was suffering the most from it. Already then Russia was appointed guilty. In this sense, fundamentally nothing has changed after February 24, 2022, only the dates of the formal beginning of the energy crisis recognized by Europe have become detached from reality and have gone into the realm of fantasies.

In reality there are three largest gas markets on our planet: The USA, Europe (The European Union together with Great Britain) and the Pacific Rim (PR). For a number of reasons related to the inept nature of energy reforms, Europe was the most vulnerable to the blows of the energy crisis. Asia-Pacific countries were protected by a large share of oil-linked contracts, and the United States partially protected high volumes of its own production. Europe was not protected, as pricing in the region depended entirely on stock exchange quotations. They grew and transmitted their growth both to the retail gas market in Europe and to the power sector and from there to other goods and services.

One of the areas affected by the global energy crisis was gas motor fuels segment.

Fluctuations of propane-butane

Strictly speaking, the world market of gas motor fuel started having problems not in 2021 but earlier. We repeatedly concerned this question when sorted as forecasts of development of fuel segments for the last fifteen years and also influence of electric transport on investment activity in a segment of the compressed natural gas (CNG), the liquefied natural gas (LNG) and propane-butane which are used as motor fuel changed. Also it is worth recognizing that even focus of our attention since 2020 was displaced towards electric cars.

Striking example in this sense is propane-butane (autogas) segment. As The World LPG Association (WLPGA) and Liquid Gas Europe note, world consumption of autogas steadily increased within the 2000-2010s. In 2019 the autogas vehicle fleet reached 27.8 million units and total amount propane-butane, used as motor fuel, — 27.1 million tons. But in 2020 consumption decreased by 10% as lockdowns worked, people began to go less, business activity was reduced.

Here it is possible to draw parallels with the Russian market of autogas. This segment of motor fuels is the most sensitive to any crisis phenomena. It is also characterized by the most noticeable fluctuations in the domestic market — both upward and downward price fluctuations.

In the second half of 2021 quotations of propane-butane sharply grew in Russia that led to growth of wholesale and then and retail prices (approximately from 23 rubles for liter to 36-38 rubles for liter). In 2022 on the contrary — quotations fell off, and retail prices fell lower than 20 rubles for liter. Now autogas retail also showed growth, having returned on the marks of the middle of 2021.

World consumption of autogas in 2021 increased by 3% — to 25.1 million tons as dynamics of production and economic activity started returning to normal. According to WLPGA and Liquid Gas Europe, in 2022 world propane-butane vehicle fleet made 28.3 million cars. The number of gas stations is about 82 thousand.

During the time which passed since 2020 there could not be conditions for sharp increase in vehicle fleet or volumes of demand for propane-butane as motor fuel. By the way, often during crises some part of car owners even removes the gas cylinder equipment as its operation becomes less favorable for them. We can’t judge how these quick-witted people feel after the crisis is over and price parameters return to normal.

It is important for us that the situation at which about a half of consumption of autogas in the world is a share of only five markets remained. These five markets are Russia, Turkey, South Korea, Poland and Ukraine.

Our country is the absolute leader in autogas segment in consumption volumes – 3.25 million tons in 2021, according to WLPGA and Argus. But our propane-butane vehicle fleet (3 million units) concedes Turkish (4,923 million) and Polish (3,394 million). Yes, we are now referring primarily to 2021 data, as more recent global statistics have not been collected yet.

As motor fuel about 7.6% of all liquefied hydrocarbon gases are used in the world. This indicator varies considerably from country to country. There are states where 92% of all propane-butane were consumed as motor fuel, and there is someone like the USA where this indicator makes only 0.4%. All this depends on economic situation, existence of a resource, development of infrastructure and on measures of the state stimulation. The last in general has huge impact on all world market of motor fuels. If a certain state for one reason or another throws the gas engine direction and decides that the future behind electric cars, consequences of this step will be more than obvious.

Fuel with «green» accent

Since the late 2010s, there has been a sharp decline in interest in gas motor fuel worldwide, more precisely — to traditional gas motor fuel and mainly in the European and American information agendas. This is largely due to the shift of emphasis to electric transportation and the discussion of the abandonment of internal combustion engines (ICE). The parameters of the EU Green Deal also played their role.

The methane segment, which in recent years has been replete with contradictory statistics, has suffered in particular. It is unlikely that the propane-butane segment was initially equipped with specialized associations that continue (albeit with a huge delay) to follow the auto gas statistics. Such organizations were formed around the methane direction as well. But their informational activity in recent years leaves much to be desired.

For example, in 1986 NGV Global was created (originally — the International association of the vehicles working on natural gas). At the moment, according to open information, more than 600 members are its part worldwide. Again, we have already drawn attention to the fact that in recent years, these kinds of organizations have started to increasingly address the topic of biomethane as a fuel supposedly more in line with the «green» energy transition.

Many fuel associations are anyway compelled to displace in the activity accents towards the low-carbon agenda. It allows keeping relevance of those «alternative» directions which these associations represent. In this sense, methane and propane-butane segments are moving in the same direction: more and more attention begins focus on biomethane and biopropane.

Biomethane is obtained by enrichment of the biogas containing 50-70% of methane, usual natural gas («from a pipe»). But as it not fully corresponds to «green» power transition, now as a promising way to carry out enrichment (renewable) biogas is considered hydrogenation of CO2.

Biopropane is a by-product by production of «steady types of fuels» — eco-friendly aviation fuel (SAF) and renewable diesel fuel (the hydrocleared vegetable oil, HVO). The last, by the way, is a product which turns out mainly from the fulfilled vegetable oil. Such technologies are realized in Russia too and Gazprom Oil Company at the expense of these raw materials receives components of ship fuel.

If to address to data of the Argus Company which since 2022 within «Argus Neftepanorama» started regular illumination of the questions connected with power transition and low-carbon power sources in the world, it will become clear that consumption of HVO and SAF is still small, but it has to grow in process of toughening of environmental standards. So, «additional support to demand for SAF in the region will be given by the decision of the European Commission according to which suppliers of fuel are obliged to mix a certain share of SAF with traditional aviation fuel». By 2025 the planes landing at the European airports will have to use fuel from SAF shares at the level of 2% and by 2050 — 63%.

It is expected that increase in demand and productions HVO and SAF will lead to increase in production of biopropane. The question remains open to what extent it will be in demand as a motor fuel in Europe, given planned ban on the sale of cars with internal engines combustion. In fact, the European Union tries again to turn focus in which it was not successful at the end of the 2000s — the beginning of the 2010s. It at the same time tries to create growth point for the industry and to replace import fuel. Certainly, any European politician will claim that focus was successful, after all EU countries reduced consumption of natural gas from 2022 to 2023. But they have such a profession — to be proud of demand collapse almost on 100 billion cubic meters under pressure of an economic crisis.

Reason for change of names

Under pressure of the pseudo-ecological agenda of the European Union the profile gas engine organizations start reconsidering accent of the activity. A striking example is NGVA Europe. It is a European association which was engaged during 15 years in promotion of compressed natural gas and liquefied natural gas on transport, and now it added to these abbreviations a prefix «bio» (bioCNG and bioLNG), declared that «advances use of natural and renewable gas as motor fuel».

In January of the current year it made rebranding from NGVA to Gmobility. The association reported that «came to glance time in carbon and neutral and completely renewable future».
It’s hard to fault the NGVA for lacking a reason to change. And it’s not only in the intensifying fight against fossil fuels at the level European legislation, but also in the fall in sales of gas engines cars in the EU.

In 2022 56.6% less cars on natural gas were sold than in 2021 in the European Union. The sales volume was reduced from 7095 to 3082. And in 2023 the profile European association of car makers ignores sales volumes of gas engine cars at all.

Of course, in Europe only two countries can be classified as world leaders of the gas engine market (in the methane and propane-butane segments -Italy and in propane-butane – Poland). Therefore, its experience cannot be fully transferred to other regions. In addition, they are still published studies demonstrating an optimistic view of gas engine technology future. Thus, according to Business Research Insights data updated in September 2023, the market for natural gas vehicles will increase from 8.53 billion dollars in 2021 to more than $17 billion in 2031. It is expected that the number of such vehicles by the end of 2028 will be 36.758 million worldwide.

But forecasting in this case bares also discrepancy of the statistics which is saved up by the present moment. So if to proceed from the materials PRNewswire, the world market of the vehicles working on natural gas in 2022 made 25.2 million units. And according to NGV Global, there were 28.5 million vehicles on natural gas in 2019 in the world. If to consider that this organization at that time estimated gas engine vehicle fleet of China in a size about 5.5 million units, and by fresher estimates it reached 7.32 million in 2020, the assessment of NGV Global could be reconsidered safely towards increase — about 30 million units in 2020-2021. However the current forecasts as you see proceed from more modest estimates. But it is supposed that the methane vehicle fleet by 2030 will reach 42.3 million units.

Withdrawal from an automobile segment

Estimates of China’s gas engine potential also suffer from some inconsistency. On the one hand, in specialized articles it is noted slowdown in the growth of the methane vehicle fleet in China since 2014 and greater emphasis on development of cars “on new energy sources”, that is mainly electric vehicles. Insufficiency is also indicated political support, and to reduce economic incentives for compared to other types of fuel.

Cumulative annual growth rate of sales of passenger gas engine cars in China from 2017 to 2019 made 5%, and electric cars — 76%. In 2020, according to PetroChina, the vehicle fleet of the People’s Republic of China working at compressed natural gas for the first time for 32 years was reduced (by 100 thousand cars — to 6.62 million units). That, by the way, does not cancel development of the transport working at the liquefied natural gas.

China does not refuse the gas engine direction. Here profile conferences in which also producers of equipment participate are held. Shift of gas motor fuel in a heavy-load segment is observed. We are talking about sale of the trucks working at LNG, and a bunkering of vessels as natural gas.

It is possible to tell that natural gas to the People’s Republic of China leaves an automobile segment, conceding it to other types of motor fuels. By the way, in process of an exit of China from the COVID restrictions the sales volume of gas heavy trucks started growing: in April, 2023 it was sold to 10.1 thousand units of heavy trucks — a record for the last 16 months.

Actually, gas motor fuel, being the full-fledged participant of the markets of motor fuels, became dependent on the gas occurring in the markets. Last year brought to China decrease in demand for natural gas at the growing prices. It, certainly, negatively affected consumption of liquefied natural gas and compressed natural gas as motor fuel. According to the Shanghai center of trade in oil and natural gas, in June 2022 a ton of LNG cost to the consumer 6252 yuans, in December of the same year — 7804 yuans per ton and in June 2023 – 3800 yuans per ton.

According to the National Energy Administration of the People’s Republic of China, in 2022, the drop in gas demand in China amounted to 1.2% – up to 364.6 billion cubic meters. The Administration notes that in the current year demand grows: in the first half of the year it increased by 5.6% — to 194.1 billion cubic meters. It is supposed that the annual gain will make 5.5%-7%, and the general indicator of consumption of gas in China will reach 385-390 billion cubic meters.

A new step on the rake

And in February, 2023 European Parliament together with European Council developed and approved the revised standards of emissions of carbon dioxide for new vehicles. In June 2022, the European Parliament supported a total ban on sale of new cars only with internal combustion engines in the territory of the EU since 2035. The corresponding plan in 2021 was presented by European Commission. European Parliament, we will remind, has no rights of a legislative initiative.

It is remarkable that the future ban on cars with DVS revolted the German and Italian automobile industry, and also part of the European politicians. They declared that the decision on fast refusal of cars with internal combustion engines will reduce competitiveness of automotive industry of the EU and will give the market of the European Union to the Chinese producers. Given that about 13 million EU citizens are employed in the automotive industry and more than 7% of the EU GDP, according to European association of car makers, is generated by the car industry, there’s a lot to worry about.

Here we have a picture of amazing short-sightedness and lack of system approach is developed: officials make populist decisions which have to approach the world to the carbon-free future and, allegedly, strengthen positions of the European car makers, but the European car makers, try to avoid this happy future.

Probably, to emphasize the level of the created mess, in September, 2023 the Head of European Commission Ursula von der Leien in the annual appeal to European Parliament, made a surprising discovery. It appears that the world markets are flooded not with cheap low-carbon production of the European automotive industry but «cheap Chinese electric cars». «We do not accept this distortion, — von der Leien declared. — European Commission begins investigation on fight against subsidies concerning the electric cars arriving from China».

In other words, the EU has proclaimed the abandonment of internal combustion engines and the transition to electric cars without a proper assessment of the economic consequences of this decision. Europe cannot refuse the ban (only for political reasons of the people advancing this ban). But Europe can’t compete

Europe can’t compete with China either. So we’re left to puff up our cheeks, investigate and then impose some kind of barrier. And the EU has already done something similar — with regard to Chinese solar panels that turned out to be cheaper and more competitive than European solar panels. It was clear to any European official that China’s great competitiveness was based solely on «protectionist» measures of the Chinese government» rather than the fact that China has a complete value chain from the extraction and processing of raw materials to the production of final products.

Someone can tell that the parallel far-fetched, but it also appeals to Ursula von der Leien: «We did not forget as unfair trade practice of China affected our solar industry. Many young enterprises were forced out by the Chinese competitors receiving considerable subsidies». Let’s remind that protecting duties and political hysterics did not rescue the European producers of solar panels. They disappeared.

By the way, how’s it going with the European investigation against Chinese electric bicycles that began in 2017? By all appearances, it is very successful.

The European accumulators are late

It is ironic that a few years ago we already concerned this subject and noted that efforts of Europe on refusal of traditional energy carriers in general and from the Russian gas in particular will lead to growth of dependence on supplies of equipment and equipment from China. It is pleasant, as the European politicians were reached by this in general simple thought.

The management of European association of car makers commented on it constrained: «Europe has to support the automotive industry in the conditions of transition to a zero indicator, having created business justification for transformation at all stages of a chain of value creation». It can be understood quite definitely: provide financial and legislative support. And as the direction to which it is necessary to pay attention, trade with Great Britain is given.

Great Britain is one of the leading export markets for car makers EU, especially in a segment of electric cars. European association of car makers notes that if the European Commission does not take urgent actions, at the end of 2023 the ten-percentage tariff for export of electric cars to Great Britain will be entered. According to Association of car makers, it can cost to the companies from the European Union 4.3 billion euros within the next three years, and production of electric cars will be reduced approximately by 480 thousand units. European association of car makers urges European Commission to prevent introductions of taxes on the electric cars traded between the EU and Great Britain since January, 2024.

The speech, in fact, that the European industry has no opportunity until the end of the current year to provide deliveries of components of batteries from producers from the EU or Great Britain. Respectively by «rules of an origin» duty will be imposed. Car makers ask to give them three more years on forming of chains of deliveries.

The fine launching site to struggle with the Chinese producers of electric cars — to buy accumulators in China without having an opportunity to replace them with own production. Not least, the global energy crisis has played a negative role in the disruption of some battery projects in Europe. You can’t blame the weak the economic feasibility of building battery production facilities in Europe if it is cheaper to bring the finished product from China!

At the moment the European car market is a restoration stage. For the first eight months of the current year sales of new cars in the EU increased by 17.9% and reached 7.1 million units. This is less than pre-COVID indicators. 9 million were sold for the same period of 2019. The crisis is not over yet.

Petrolizaton of the European market proceeds. For the first eight months petrol cars occupied 36.5% of the market, hybrids – 24.9% and the loaded hybrids – 7.4%. All this cars which can use gasoline as fuel, their cumulative share exceeds two thirds of the European market. For the same period of time a share of «pure» electric cars reached 13.9%. In August this indicator for the first time exceeded in the European market 20% (in August of last year – 11.6%), in absolute values of sale reached 165.2 thousand. Electric cars the second time in a year overtook diesel cars on sales.

The consequences of dieselgate are making themselves felt.

If the issue with batteries and taxes is not resolved, then these Electrical advances could come at a cost to manufacturers and consumers.

Time for banal discoveries

At the moment on a global scale electric cars remain the most dynamically growing segment of the market. If last year electric vehicle fleet reached 26.5 million units, in the current year the International Power Agency (IPA) predicts growth of this indicator to 40 million units. It impresses. If this indicator is reached, it will be a question that electric cars will occupy 2.5% of world vehicle fleet or nearly reached cumulative number of the cars using gas motor fuel.

The leader of electric car direction is China.

Let’s note that in March of the current year the article «Electric Cars and Climatic Ambitions of China appeared under the threat because of sharp increase in prices for critical materials» was published in the Nature magazine. It raised the topic to which we devoted the article «Someday Tomorrow. How the metals raised the prices of electric cars». Actually, since then the problem of a rise in price of materials of which accumulators are made, did not disappear, and in the context of new optimistic forecasts about growth of an electric segment and threats of the European Union concerning internal combustion engines it on the contrary — became aggravated.

Authors from the Nature note that on March 8, 2022 the price of nickel exceeded 100 thousand dollars per ton, then the London exchange of metals (LME) suspended the auction on the following some days. Now nickel fell in price, but fears of new jumps remain. It «not only complicates forecasting of market tendencies, but also puts the big pressure upon the market of electric cars which depends on lithium — ion accumulators».

At the moment lithium though fell in price after the long period of an increase in prices, but he is still four times more expensive than was at the end of 2020 (when the rise in price began). The main problem for an electric segment is that appeal of electric cars depends on the price, and the price — from the cost of accumulators.

Let’s remind that according to IPA, by 2040 for production of electric cars it will be required at least in 30 times more of lithium, nickel and other key minerals than in 2021-2022.
Most forecasts previously suggested that the greater the demand for materials for electric vehicles, the more production, and the lower the price final products. After 2021 in the minds of many researchers doubt arose: could prices for critical materials in the future grow due to an imbalance of supply and demand? Respected publications like the above-mentioned Nature allow you to broadcast almost seditious thoughts: What if electric vehicles don’t grow at the rate predicted?

But for now these thoughts are expressed more than cautiously, implying that there will still be records, they will just be a little later and a little less more impressive than expected. So, researchers suggest that if material costs will be high, then a share of electric vehicles in China in 2030 year will be 35% (in the base scenario — 49%) and in 2060 — 51% (in the base scenario — 67%). Note that the demand for nickel, lithium and other critical materials will increase. You just need to be prepared for what the electric vehicle segment will not grow at the same rate as it does waited two or three years ago, and he will not be able to solve global climate objectives.

Gas and lithium

As for our country, lithium projects are also developed in Russia. Leaders are the largest energy companies — Gazprom and Rosatom. They are guided not only by electric car segment.
The total of electric cars in our country as of the middle of the current year made only 30 thousand units. It is worth recognizing that the electric car concept accepted two years ago was unrealistic. According to its parameters, it is supposed to prepare by 2024 a base for mass production of electric cars. It is still supposed to bring at this stage production of electric cars not less than to 25 thousand a year, as well as to put into operation 9.4 thousand (or more) charging stations. In 2025-2030 the output of electric is to reach 10% of total production of vehicles in the country.

Apparently, due to the low pace of electric mobility, the Ministry of Industry and Trade of Russia proposes to increase the subsidy for the purchase of electric vehicles from Russia assemblies.
It is interesting that 5 billion rubles are allocated for support of electric cars in 2023 in our country. It seems that it is a large sum, but it will be enough approximately for 10 thousand electric cars. If to assume that domestic auto production will be restored in the next years at least to 1.5 million units, the number of the made electric cars is to make about 150 thousand in the second half of the 2020s. In proportion it will be required to increase also funds for their support. Whether the state budget is ready to it? Moreover, price reductions are unlikely to be expected.

As shown by the events of the price crisis in the domestic motor market fuels, it would be worth focusing on gasification of agricultural machinery so that reduce farmers’ fuel costs. But at the moment in economy, about 15 thousand vehicles operate on gas engine fuel. And in general, implementation of gas engine programs at the country level would solve some problems with fuel availability and prices. Therefore, realizing more fashionable electric vehicle programs, do not forget about the stock of which fuel Russia is a world leader.