- The world is grappling with gravity-defying energy price spikes on everything from gasoline and natural gas to coal.
- Some fear this may just be the beginning.
- What could end the energy crisis? Of course, no one can say with certainty exactly how all of this will play out.
From gasoline and natural gas to coal, the world is coping with gravity-defying energy price hikes. Some fear that this is only the beginning as reported by CNN.
Energy sector in crisis
Current and former energy officials tell CNN they worry that Russia’s invasion of Ukraine in the wake of years of underinvestment in the energy sector has sent the world careening into a crisis that will rival or even exceed the oil crises of the 1970s and early 1980s.
Unlike those infamous episodes, this one is not contained in the oil.
This energy crisis is much bigger than the oil crises of the 1970s and 1980s.
The global economy has largely been able to withstand surging energy prices so far.
Supply shortages could lead to some difficult choices in Europe, including rationing.
Depressing forecast
Joe McMonigle, secretary-general of the International Energy Forum, said he agrees with this depressing forecast from the IEA.
“We have a serious problem around the world that I think policymakers are just waking up to.”
“It’s kind of a perfect storm,” McMonigle, whose group serves as a go-between for energy-producing and consuming nations, told CNN in a phone interview.
The extent of that perfect storm — underinvestment, strong demand and supply disruptions from the war — will have wide-reaching consequences, potentially threatening the economic recovery from Covid-19, exacerbating inflation, fueling social unrest and undermining efforts to save the planet from global warming.
Birol warned of supply bottlenecks of gasoline and diesel, especially in Europe, as well as rationing of natural gas next winter in Europe.
A US power grid regulator warned last month that parts of the country could face electricity shortages and even blackouts this summer.
‘Our fears have borne out’
Former Obama energy adviser Jason Bordoff and Harvard University professor Meghan O’Sullivan wrote a piece in the Economist in late March warning that the world was on the cusp of “what may become the worst energy crisis since the 1970s.”
“Since we wrote that, our fears have borne out,” Bordoff, co-founding dean of the Columbia Climate School, told CNN.
Prices have not spiked nearly as much as they did then and policymakers have not resorted to extreme steps like price controls.
“Were we to resort to price controls and price caps, then we could have shortages,” McNally said.
But as the brutality of the war became clear to the world, that hands-off approach did not last, with the United States and other countries banning Russian energy imports.
Already, US gasoline prices have surged by 52% over the past year to record highs, angering the public and contributing to the nation’s inflation crisis.
‘Putin just brought us there faster’
Today’s energy turmoil is not simply the result of the war in Ukraine.
Upstream investment in the oil and gas sector stood at just $341 billion in 2021, 23% below the pre-Covid level of $525 billion and well below the recent peak in 2014 of $700 billion, according to the IEF.
“This investment shortfall has been brought on by a series of factors, including a push among investors and governments to bet on clean energy, the uncertain future of fossil fuels and years of weak and volatile oil prices.
And that exacerbates the price volatility and makes it more difficult to resolve the supply side,” said Francisco Blanch, head of global commodities at Bank of America.
“We were heading towards a crisis anyway.”
Shortages and gas lines?
The 1973 oil crisis was marked by hours-long lines at gas stations, fuel shortages and panic.
“You’re going to see that very soon, though maybe not in the US,” said Bank of America’s Blanch.
Blanch said he thinks this risk is lower in the United States because the country remains one of the biggest oil producers on the planet and is a major exporter of energy.
Europe, on the other hand, is more reliant on foreign oil and natural gas — especially from Russia.
Blanch noted that sky-high natural gas prices have already shut down factories in Europe.
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Source: CNN
