Energy crisis
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Energy crisis
30-06-2024
Energy crisis
The world is grappling with rising energy prices for everything from gasoline and natural gas to coal. Some fear this is just the beginning...
They worry that the Russia-Ukraine war following years of underinvestment in the energy sector has pushed the world into a crisis that would rival or even exceed the oil crises of the 1970s and early 1980s.
The global economy has largely been able to withstand higher energy prices so far. But prices may continue to rise to unprecedented levels as Europe tries to distance itself from Russian oil, and perhaps gas. The supply shortage could lead to some difficult choices in Europe, including rationing.
Joe McMonigle, secretary-general of the International Energy Forum, said he agreed with these dismal forecasts from the IEA. “We have a serious problem around the world. I think policymakers have just woken up. It's kind of a perfect storm.”
That storm will have wide-ranging consequences, potentially threatening economic recovery from Covid, thus contributing to worsening inflation, fueling social unrest and undermining efforts to save the planet from global warming.
Of course, there are major differences between today and the 1970s. Prices did not rise nearly as much as they did then, and policymakers did not resort to extreme steps such as price controls.
When the war began, the West sought to avoid directly targeting Russian energy supplies because they were simply too important to global markets. Not only is Russia the world's largest exporter of oil, it is the largest exporter of natural gas and a major supplier of coal, but as the brutality of the war became clear to the world, this laissez-faire approach did not last, as the United States and other countries banned Russian energy imports.
Russia retaliated against Western sanctions by restricting or even halting its shipment of natural gas to several European countries.
The European Union announced plans this week to phase out 90% of Russian oil imports by the end of the year. This move raised the specter of further retaliation by Russia.
This transitional situation has exacerbated supply shortages in energy markets that were already tight.
Today's energy disruptions are not just a result of the war in Ukraine. They are a byproduct of drilling investments in oil and natural gas, which are so resource-depleting that they require huge sums of money just to maintain, let alone increase, their production.