Are we heading towards a future energy crisis?
The price of gasoline in the United States has increased by more than 50% in the last year. The price of natural gas in Europe has climbed by about 500% during the same period
The Covid-19 pandemic has been at the forefront of public imagination since its onset in 2020. After putting enormous resources into combating the spread of the virus, the infections have subsided and the world has begun to heal.
However, another crisis is looming on the horizon. At present, the world is witnessing its largest energy shortage since the 1970s.
The price of gasoline in the United States has increased by more than 50% in the last year. The price of natural gas in Europe has climbed by about 500% during the same period.
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As per a Bloomberg report, power companies in Asia are purchasing liquefied natural gas at record rates to secure a consistent supply.
A major fertiliser manufacturer in Europe has already been compelled to temporarily shut down two operations in the United Kingdom due to rising energy prices, and there are fears that other businesses will follow suit.
The Energy Information Administration of the US has released a report warning Americans that they would most likely have to pay significantly more to stay warm this winter, particularly if temperatures fall drastically below freezing.
Why is the price of fuel rising so drastically? The demand-supply formula of fundamental economics can give you a decent idea.
If demand is more than supply, there is a shortage of goods and price increases. When supply rises, prices fall, and when supply falls, prices rise. A similar phenomenon is taking place; energy demand is exceeding its supply, and raising prices consequently.
Undoubtedly, various factors are responsible for this sudden rise, including the pandemic, ineffective government policies, and climate change.
Many countries have stopped investing in fossil fuels (for a variety of valid reasons), resulting in a reduction in the supply of these fuels. However, we do not have enough renewable energy to completely replace fossil fuels at this time. We will certainly do it, but not right away.
The three major fossil fuels: oil, coal, and natural gas provided fuel for over 80% of world energy consumption in 2019. Whilst wind accounted for a little over 2% of total energy consumption, and solar contributed slightly over 1%.
To entirely replace fossil fuels, wind and solar production and distribution will need to rise by 2,500%, which is unlikely to happen within the next several years. A transitional plan is what we require. Without it, we will face a massive energy crisis.
Industrialised civilisations cannot function without consistent access to energy, so when these shocks occur, governments do everything possible to keep the power on.
For instance, Germany has established an outstanding renewable energy supply over decades. But the fact remains that 56% of total electricity in Germany was produced from fossil fuels in the first half of 2021, nevertheless, the country is attempting to eliminate the use of fossil fuels.
But the production of coal-based electricity rose from 21% to 27% in Germany during the same period, let alone all other sources of fossil fuels.
The inconsistencies of global energy policy have reached the point of being almost ludicrous. For instance, China has prohibited the import of coal from Australia.
Indeed, moving away from coal to natural gas may be good for the environment, but China, Japan, and South Korea all purchased a lot of LNG, driving up market prices.
Furthermore, floods in China's eastern coal mines halted much of the country's coal production, limiting the country's electricity generation and causing severe power shortages throughout the country.
Following this incident, the Chinese government ordered several enterprises to cease or reduce production, resulting in global shortages of many key products.
On the flip side, OPEC has been urged by the Biden administration to raise production. The US is encouraging Arab countries to produce more and more while inhibiting its own oil and gas companies from boosting output.
On the other hand, Europeans are now hoping that Russian President Vladimir Putin would increase natural gas exports to their countries even as they highly discourage domestic gas production.
Reducing carbon emissions is the most critical goal in the modern world and it should remain our primary goal. The shift from coal to natural gas is the most straightforward approach to accomplish this in the short term because it cuts carbon emissions by around half.
For example, between 2005 and 2019, the majority of the reduction in CO2 emissions in the US was due to the move from coal to gas.
A study published in the journal Environmental Research Letters investigated more than 29,000 fossil-fuel power facilities around the world and discovered that only 5% of them were responsible for 73% of global carbon emissions.
We might easily afford to pay for the conversion of those 1,400 plants and earn a significant carbon reduction. Furthermore, the International Energy Agency predicts that existing solutions can prevent over 70% of methane leakage from oil and gas production.
The goal must be to power the world with renewable energy sources. Solar and wind energy costs have dropped considerably in recent years, which is good news for global citizens. They are now more accessible to the public than they have ever been.
Storage, which was historically a major issue with these intermittent sources, is now being addressed as batteries get more powerful and other storage solutions gain traction in the marketplace.
The amount of money spent on research and development in this field needs to be significantly increased, although real progress is being made.
However, we must continue to reduce emissions today while maintaining the flow of adequate energy. If this does not happen, we will be subjected to more energy crises in the long run, which might easily lead to a backlash against environmental regulations.
In this issue of global energy crisis and keeping the world environment healthy, governments need to be aware and have to make a concerted effort.
Md. Obaidullah is a Research Assistant at the Centre for Advanced Social Research, Dhaka.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.
