Santos’ boss has warned international LNG prices could harm Australian manufacturers.
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The Santos Ltd (ASX: STO) share price is struggling after the company’s CEO commented that Australia might not dodge the current energy crisis.
Santos’ managing director and CEO Kevin Gallagher, recently spoke at the Australian Financial Review’s Energy and Climate Summit. He reportedly noted that, if international liquid natural gas (LNG) prices don’t fall soon, Australia will inevitably be affected.
At the time of writing, the Santos share price is $7.39, 1.34% lower than its previous close.
That’s relatively in line with the broader energy market. Right now, the S&P/ASX 200 Energy Index (ASX: XEJ) is down around 1.7%. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is down 0.3%.
Let’s take a closer look at the oil and gas producer’s boss’ comments.
Santos share price slides amid energy concerns
The Santos share price is sliding today after the company’s boss flagged that the international energy crisis might soon reach Australia.
The price of LNG has soared to all-time highs in recent weeks. According to Reuters, the surge was spurred by the ongoing energy crunch in China and low European inventories.
The outlet stated that experts estimate the average price for a metric million British thermal units (MMBtu) of LNG for November delivery into Northeast Asia to be around US$37.
While the commodity’s price has since relaxed, it’s still above ideal levels.
According to reporting by the Australian Financial Review (AFR), Santos’ managing director and CEO Kevin Gallagher, has said that if gas prices don’t ease, Australia’s contract tariffs will be pushed higher.
As a result, the pressure on manufacturers dependant on LNG might increase. The AFR quoted Gallagher as saying:
We know what the complaints from the manufacturers were here on the east coast when prices approached double figures…
So you can only imagine what that would mean for us here in terms of the difficulty to economically run those same manufacturing businesses, if they’re exposed to the same international prices.
Gallagher reportedly blames the surging LNG price on underinvestment spurred by environmental, social, and governance (ESG) measures, as well as drops in the price of oil.
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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.