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Global Energy Crisis – Know the Reasons and Effects of It

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They say Hindsight is 20-20. The phrase means you have a better understanding after the event, and you get stuck in the loop thinking, how did we not see it?

The latest energy crisis the world has been facing is the result of astronomical rise in natural gas prices, the steep hike in the price of coal, a forecast of oil touching $100, and the pandemic-led economic issues.

No country is untouched; the energy consumption continues to increase while the supply dwindles. We are headed for a global energy crisis of epic proportions.

Global Trouble

Britain – No drivers to transport fuel. Soldiers are delivering fuel to gas stations.
Eurozone – Inflation was at a 13-yr high while the rest of Europe faces a natural gas crunch.
China – Factories are shutting down due to coal shortage. There is no fuel to light homes or heaters.
South America – Is suffering from blackouts and droughts.
India – Shortage of coal for power generation and rising inflation.

How is it that every country is facing issues of energy at the same time?

The post-pandemic rebound is to blame. During the lockdown, everything shut down –no businesses, no transport, no travel. With no economic activity, the energy demand declined. Large oil producers slashed their output, producing less coal and oil. As soon as vaccines came into the picture, lockdowns lifted. People started going out, traveling, factories reopened, airlines opened up, increasing the energy demand. But, the supply did not increase; it stayed at 2020 levels.

Energy Crunch –Causes 2021

It is not easy to point fingers at one specific industry practice or industry and blame them for the whole energy crunch. There are several causes…

It is not easy to point fingers at one specific industry practice or industry and blame them for the whole energy crunch. There are several causes…

  1. More demand less supply: The energy demands the world over increased as soon as the countries lifted the lockdowns. Power supply and energy production stagnated, which meant a shortage of energy.
  2. Transition to Green Energy hit Fuel supply: World leaders committed to moving from traditional sources of power to clean energy without planning for large-scale transition. They don’t have a specific plan to shift from fossil fuels to renewable resources. They did not invest enough in green energy. Most countries today are scrambling to cut their emissions rapidly. China committed to reduce 65% emissions by 2030. To meet this obligation, the President cut off the coal supply in China, leaving homes and businesses in the dark. Several countries face the same issues, but regional factors play a role too.
  3. Regional Issues: South America gets 65% of its power from hydroelectricity. However, the rivers are running dry while Brazil is facing severe blackouts. India’s coal stores have fallen to levels never seen before. The Center has asked power producers to import 10% of their coal needs to meet the shortage while warning states from selling electricity on power exchanges to profit on surging prices.

While we understand what’s causing the energy crisis, the effects are rippling down globally.

Several countries are facing shortages, rising inflation, economic slowdown. Natural gas prices rose 400% this year in Europe. Brent Crude is trading at $85 a barrel. These surges will affect everyone. With winter around the corner, heating homes, meeting the demand for power during festivals will be difficult.

Is there a way to mitigate the effects of the energy crisis? Yes, there is, but it means increased production of energy to meet demand. However, with world leaders pushing for green energy transition, it will be a waiting game to see what they decide.

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