Power outages, a lack of coal, and historically high costs for electricity, coal, and liquefied gas are all symptoms of the world energy crisis. Along with it, oil prices surpassed $80 per barrel. What factors led to this crisis?
The world is currently paying a price for the extreme climate policies of European nations and some US states, their disregard for the fundamentals of energy security, the exaggerations of the International Energy Agency, the UN, environmentalists, and businesses that profit from significant government subsidies for renewable energy and electric vehicles, as well as the exaggerations of the devoted media. For them, or for those who fell for the hook, the emphasis of the numerous energy conferences, even those conducted in “OPEC” nations, has been on these exaggerations and has given them the legitimacy they do not deserve.
Since the energy crisis in Lebanon, Iraq, and Venezuela is ongoing and is mostly the result of governmental corruption, it will be disregarded.
The energy crisis we are currently experiencing is just the beginning, as readers of my writings are aware because I have issued several warnings about it over the past three years. The crisis I’m referring to is worse than what we now experience, and by all accounts, it may be a historic crisis.
The global drought that emerged at the start of the current energy crisis caused the quantity of electricity produced by hydroelectric power to decline along with the water level in dams. How was it made whole? Solar and wind energy cannot make up for the sources that were not used, thus compensation must come from those sources. The answer is to run idle fossil fuel facilities or improve the operating rates of fossil fuel plants. From this point forward, the demand for coal, gas, and oil started to rise.
There were several factors that resulted in the global energy crisis, including:
- Economic factors
In general, the fall in oil and gas prices over the past few years has resulted in less investment in the sector, as well as less investment in the coal business. The International Energy Agency, environmentalists, and devoted media all exaggerated things, which also led to a decline in business investment.
Due to massive government subsidies given to the electric vehicle and renewable energy industries, these sectors have established political and media lobbies that influence policymakers and the media. However, the immediate causes were evident in the economic rebound that followed the introduction of the vaccine, the end of quarantine operations, and the opening of the economy, first in China, then moving on to Europe, then India. Along with this, various governments presented sizable economic recovery packages, which raised demand for energy in general and electricity in particular.
The most significant of them was the growing reliance on gas over the past several years as a result of its cheap pricing and low emissions. Gas was more influenced by a number of factors. When the sun set or the wind stopped, it served as a substitute energy source for renewable energy.
Due to the historically high spot market rates for gas and liquefied gas, exporting nations opted to stick to the minimum contract and sell the remaining quantity on the open market. The amount of gas that the contractors could access decreased as a result. This clarifies the Russian claim that “Gazprom” had delivered all of the agreed-upon amounts. The statement is true, but it also indicates that the contract’s minimum has been reached and that any amounts over that have been sold on the spot markets. This subject will be brought up once again while discussing political considerations.
India became more dependent on domestic coal as a result of the sharp increase in the price of liquefied gas and coal, but the low stock levels in power plants, the subpar quality of Indian coal, and the inability to boost output all contributed to the shortage of supply. Energy prices have also increased as a result of soaring transportation expenses.
- Natural factors
As was said in the outset, the problem started when rains stopped falling and droughts appeared in many parts of the world, which lowered the amount of electricity generated by hydroelectric power. Renewable energy cannot make up for it, thus more gas and coal were utilized, occasionally fuel oil, and electricity was rationalized or shut off. We saw this in Brazil, California, and a few Central Asian nations. In comparison to previous year, electricity generation in the American West has decreased by 14%.
As a result of low gas and coal supplies brought on by increasing demand during the hard winter and ongoing quarantine efforts, which meant that more people would stay at home and use more heating, the issue continued to worsen. At the end of the winter season, the stock was intended to be rebuilt, but the economic expansion brought on by the openness activities prevented this from happening. Then came the summer, which by all accounts was scorching, particularly in Europe. As cooling needs grew, many nations were unable to enhance their gas and coal reserves.
Additionally, due to the lack of winds brought on by the high temperatures, several businesses were compelled to rely more heavily on gas and coal, which led to a rise in their costs and an increase in power rates.
Both China and India experienced the shutdown of coal mines during the monsoon season, although India saw a higher impact than China.
- Technical reasons
As was previously indicated, due to the economic recovery and increasing demand for energy, several nations were unable to replenish their gas and coal supplies as winter came to an end. Another issue, which specifically affected European nations, was that at the beginning of August, a fire broke out in a Gazprom pumping station in Siberia, which temporarily reduced Russian supply to Europe. They were unable to save the situation since maintenance work was taking place in the North Sea’s oil and gas fields at the same time. The disruption of the underwater cable that transmits energy from France to Britain made the situation worse.
The most well-known coal mine incidents in China this year occurred in April, June, and August, and as a result, production in these mines was halted. A flood caused the catastrophe in August, which resulted in the deaths of 19 people.
Gas was being pumped to China from the “Amur” gas facility in eastern Siberia, but it was stopped a few days ago due to a fire.
Australia has had supply disruptions and electrical shortages in the past, but in recent months in particular, it has seen an explosion at a coal mine and a “high tension” line owing to extreme heat. Prior to that, massive storage batteries in California that were meant to store renewable energy and use it when required were stopped owing to high temperatures, which increased reliance on power produced from coal and gas. A number of European towns, including Stockholm and The Hague, lost power as a result of fires in nearby transformers.
- Political factors
The current energy crisis was mostly caused by political decisions that included the quick decommissioning of coal and nuclear energy, but there was a failure to develop replacements for them. Political forces, therefore, played the largest part in the issue. The emphasis has been on solar and wind power, oblivious to the fact that coal and energy use a lot of energy, but wind and liquid energy have low densities.
Particularly in Britain, the gas markets were liberalized without any administrative or legislative controls to keep them in check during emergencies. Companies were permitted to seal the gas tanks in order to cut costs and take advantage of neighboring nations’ storage, which resulted in a very limited amount of storage space.
Due to Britain’s withdrawal from the European Union and the tens of thousands of truck and tanker drivers most of whom are from Eastern Europe returning to their home countries, the country is currently experiencing a domestic fuel crisis.
Electrical interconnection was established throughout Europe without the development of administrative or judicial instruments to regulate electricity exports and imports. This results in a pricing war since the highest bidder will receive the power.
The goal has been to eliminate long-term contracts in favor of spot markets, particularly India, and decouple gas pricing from oil prices. While the increase in the prices of LNG contracts was straightforward and correlated with oil prices, the increase in spot market prices increased by more than 20 times as a result of this procedure. Politicians made the choice to forgo contracts in favor of spot markets because they believed that by doing so, they might compel the nations that produce the goods to sell for a lower price. As a result, the magic worked against the magician.
Beijing’s decision to halt coal imports from Australia was influenced by the trade conflict between China and Australia, which exacerbated China’s energy dilemma. The central authority in Beijing and the local governments that produce coal are having internal issues. Due to these issues and the difficulty to import enough coal from Mongolia, local coal prices increased, which was what the state governments desired.
It is widely believed that the Chinese government’s intention to lower pollution levels in these areas in advance of the Winter Olympics is what is behind the shutting down of power plants and power disruptions in Chinese cities.
