What Are the Consequences of the Energy Crisis?

Energy Crisis

Winter is coming and with it comes a storm in the global energy market.

In the past few months, both the UK and China have struggled with energy shortages. Globally, the prices of gas, oil and natural gas have been soaring as economies are opening up again after experiencing a slump because of the CoronaVirus pandemic. Oil prices have passed US$80 per barrel and natural gas prices rose by 20% around the end of September. This crisis is fueled by a wide array of reasons, from coal shortages, supply restrictions imposed by The Organization of the Petroleum Exporting Countries (OPEC) to a shortage in wind output for electricity generation.

Naturally, when fuel prices surge, the after-effects are bound to spill over to the rest of the world. Let’s take a look at the possible repercussions of this crisis.

Windfall gains for oil producers

As the energy crisis intensifies, OPEC countries have begun ringing alarm bells about the impending turbulence in the oil market. Iraq, one of OPEC’s member countries, expects a surge in demand for crude oil. Other oil producers, like Nigeria’s state oil firm Mele Kyari, predict a surge in petroleum demand to one million barrels a day, with prices increasing by US$10 a barrel in the next six months. Goldman Sachs warns that a cold winter could overwhelm the production capacity of oil-producing countries, which could further the price surge.

With China, the largest producer of coal in the world, seeking to reduce its carbon emissions and India, the second-largest coal producer, experiencing an inventory shortage, prices of coal are rising at an alarming rate as well.

However, this surge in prices could lead to windfall gains for OPEC countries and coal producers in Australia. As countries compete for energy supply, Australia’s liquefied natural gas exporters, who are gaining US$349 billion from this crisis, are expected to emerge as winners.

Shift to electric vehicles

As people struggle to foot the rising fuel bill, there might be a shift towards electric vehicles (EVs). EVs are expensive to buy but cost less in the long run. The average cost of driving an EV for 100 miles is US$5.50-US$8, as opposed to US$17.47-US$21.50 for a petrol or diesel car. Inquiries about EVs have been surging in the UK amidst the energy crisis.

While EVs might seem like the solution to a growing fuel shortage problem, you need to consider where the electricity powering these vehicles comes from. As the energy crisis deepens, the cost of electricity generation is also soaring. As of 2019, 64% of global electricity was generated from fossil fuels.

Risk of inflation

Oil prices and inflation have a cause-and-effect relationship. As oil prices move up, so do inflation rates. This is because oil prices determine the cost of logistics transportation, and in turn affect the prices of commodities. While this relationship has deteriorated over time, it is still evident in the current energy crisis that the two are correlated. The Bank of England has warned that a surge in energy prices will cause inflation to rise by 4% in winter this year.

In Europe, the energy crisis is threatening the fertilizer and meat industries, foreshadowing tighter food supplies and higher costs. Whereas in China, the crisis has led to a shutdown of production in many Apple factories in the country.

Laszlo Varro, a former chief economist at the International Energy Agency, says, “while the current market tightness is primarily due to a robust demand, it is a useful case study on how the economics of a supply restriction driven transition could unfold”. The true extent of the crisis will only be apparent, once winter rolls in and energy demands see a further increase.

Header image courtesy of Unsplash


Share on facebook
Share on twitter
Share on linkedin
Share on email


5 Essential Tricks to Master Microsoft Excel

5 Essential Tricks to Master Microsoft Excel

Microsoft Excel (MS Excel) is a must-have for any business. It is a powerful spreadsheet software application that allows users to store, organize and analyze data. While Excel is fairly easy to use, it can be tricky to become an expert. Don’t know where to start? We have compiled a list of easy-to-follow hacks that will help you become a pro at Excel!

Top Three Weirdest Mobile Game Advertisements

Top Three Weirdest Mobile Game Advertisements

Whether on YouTube or Instagram, I’m sure you all must have seen at least one mobile game advertisement. One common trope with today’s mobile game advertisements is that they tend to mislead their audience.
You might have come across these weird ads while scrolling through social media: In the ad for the strategy game “Game of Sultans”, a sultan is fat-shaming his daughter; in the match-three puzzle game “Lily’s Garden” ad, women use washing machines as vibrators.

The Maximalist Fashion Trend Where Did It Come From and Where Is It Going

The Maximalist Fashion Trend: Where Did It Come From and Where Is It Going?

If you Google “maximalist fashion”, you will be swamped with dressing guides dedicated to this “the more, the better” trend published by leading fashion magazines in 2022. Rapidly gaining popularity in the last couple of years, maximalist styles are breaking out of the runway of an Haute Couture fashion show, a red carpet event or a K-pop performance to conquer streets in high fashion neighborhoods.

How Is Technology Influencing the Food and Beverage Industry

How Is Technology Influencing the Food and Beverages Industry?

Food waste, sustainability and animal cruelty are some of the biggest challenges facing the food and beverage (F&B) industry nowadays. Like any other sector, the industry is dipping its toe into technology and innovations to seek solutions. While we are already seeing more food tech solutions in our everyday lives, like plant-based meat alternatives and food waste management startups.

3 Innovations for a Cleaner Environment You Never Heard Of

3 Innovations for a Cleaner Environment You Never Heard Of

Innovation in clean energy, sustainable infrastructure and eco-friendly solutions to environmental hazards are the need of the hour. The burden on the world’s natural recourses is immense, and it is high time we focus on renewability and diversification. While we are only scratching the tip of the iceberg, here are three innovations working to create an environment-friendly future.