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 because 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 five fold, 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.

A number of factors are fueling the price surge in natural gas and commodities like 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.”

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 made sure to point 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.