In the latest developments in oil prices in the international market, the price of a barrel of oil exceeded the ceiling of $86 a barrel yesterday, Monday, October 18, 2021, a new rate that reflects the extent of the crisis experienced by the oil market, in terms of supply not meeting the increasing demand, as well as prices Energy that confuses the accounts of consuming countries and the existence of a state of uncertainty about the future prices of goods and services in the international market.
In these lines, we try to shed light on the energy crisis, in terms of its causes, repercussions, future, beneficiaries and those affected by it.
What are the causes of the energy crisis in the world?
There are a number of reasons that led to the emergence of the energy crisis in the past two months, whether with regard to high prices, or with regard to the lack of supplies, and it had a clear impact on the electricity consumption bills of citizens in the main energy consuming countries in America, Europe and Asia, or in a shortage of electricity. Energy in China, which had to disrupt production in many factories, especially energy-intensive industries, and two-thirds of the Chinese provinces were affected by power outages in the last few period.
In light of reading the causes of the crisis, the two energy experts Carlos Fernandez and Ger Gilly present, on the website of the International Energy Agency, an analysis of the energy crisis, and they mention that one of the causes of the current crisis is the decline in investments in the oil and gas fields, after the drop in prices in the international market, in the period 2015- 2020, as well as very cold winters in the northern hemisphere.
The decline in production and the low demand for oil and gas during the Corona crisis contributed to companies and governments’ reluctance to carry out maintenance operations in production fields, and this affected supply negatively, at a time when demand for oil and gas was recovering.
The decline in strategic stocks from their natural averages had an impact on the crisis. The decline in stocks led to an increase in demand, and this helped increase the price.
The decrease in natural gas stocks in Europe in the last period amounted to 15% compared to those averages in the past five years.
What increased the gas crisis also was the Russian Gas Company’s interest in long-term contracts, and its failure to pay attention to short-term contracts except in a small scale. Then the demand for natural gas increased.
Where is the crisis most severe now?
The energy crisis is intensifying in the major energy consuming countries, which used to obtain cheap energy from mid-2014 to the end of 2020, led by America, Europe, China, India and the rest of the energy importing countries, where prices are rising and production rates are declining.
There is a state of confusion awaiting the economies of these countries, due to the wave of inflation that they are witnessing initially, but it will undoubtedly increase with the advent of the winter months, and its repercussions will be greater, after the movements of lack of energy supplies affect the rise in prices of products in China and other countries that are a source Head of commodities that represent basic needs for consumption and production.
The energy crisis is currently intensifying in the major energy consuming countries (Getty Images)
What is the impact of the crisis on the electricity service and the rest of consumer goods?
The rise in oil and natural gas prices has led to an increase in the prices of electricity consumption for consumers as well as in industries that depend on electricity generated from fossil fuels (oil, natural gas, and coal). The figures indicate that gas prices have reached 10 times their level a year ago in both Europe and Asia. , while the price of natural gas in America tripled in October 2021, and in Germany, the rise in natural gas prices led to a 6-fold increase in electricity prices than they were in 2020.
It is not possible to stand on the direct impact of energy on electricity and heating prices, as the “FAO” indicates that food prices rose in September 2021 on an annual basis by about 32.8 percent, and it would have bad consequences for many countries if the crisis of high energy prices coincided with a crisis The rise in food prices will have a direct impact on the increase in poverty and hunger rates in the least developed countries, as well as in the developing countries.
How do experts expect the world's energy situation to be in the coming winter?
Experts look at the energy situation in the world during the coming winter in the light of the mechanisms of supply and demand on the one hand, and on the other hand, from the angle of the nature of the winter season in terms of the harshness of the cold and the duration of winter. The wave of rising energy prices will continue, and may exceed $100 per barrel, and there are expectations regarding natural gas and coal that the price of one million thermal units will reach $30, and that the price of a ton of coal will reach $190.
Undoubtedly, the passing of the northern hemisphere with a severe winter will increase energy consumption, and then this will lead to an increase in carbon dioxide emissions, and the occurrence of ominous climate imbalances.
What solutions are countries working on to remedy the upcoming economic disaster?
The solutions that can avoid the crisis depend on the existence of a state of balance of interests between the conflicting major powers. Russia today, for example, finds its help in activating the natural gas card as a “geopolitical” commodity to settle many files with Europe and America, and compensate for the years of cheap oil in which it wasted its wealth.
Also, the international equation regarding the relationship of developing countries with developed countries needs a development that allows developing countries to benefit from technology, in exchange for developed countries obtaining raw materials, especially oil, natural gas and coal. For many years, developing countries have been demanding fair trade, while developed countries have been demanding free trade achieve their interests without regard to the interests of developing countries.
And if there are efforts being made, there is a need to inject new investments in the oil and gas fields, remove obstacles in the way of supplies, work on licensing the cost of shipping, and reduce the cost of insurance on the movement and transportation of goods.
In light of the continuing energy crisis, betting on alternative energy is not appropriate in the short and medium terms (Getty Images)
What about the bets of shifting towards alternative energies?
The current crisis has revealed that the efforts made in the field of alternative energy are still failing to meet the needs of the world, to be a complete alternative to oil, natural gas and coal. In fact, the measures that governments will take to confront the energy crisis may help, such as reducing taxes and other facilities for oil and gas producers, To reduce spending on investments directed to the field of alternative energy, as well as research related to it, which makes betting on alternative energy inappropriate in the short and medium terms.
What about the Arab region?
It is not possible to talk about the energy crisis without talking about the Arab region, which includes about 9 oil and natural gas exporting countries, where Arab countries account for 25% of global oil production, and about 15% of natural gas production.
At a time when the Arab oil-producing countries will benefit from the rise in energy prices in light of the crisis of high prices in the global market, and in a way that alleviates their financial crisis in the short and medium terms, they will also pay the price in the high bill of their commodity imports from all other commodities, because the Arab countries are not It is sufficiently productive of industrial goods, as well as being highly dependent on imported food.
Are oil and gas exporters the biggest beneficiaries?
The constant and high price movement of oil and gas in the international market reflects the initial result that the oil and gas exporting countries will be the winners from this crisis, because it leads to an increase in their foreign exchange resources and compensates for years of cheap energy.
The average oil price in the nine months of 2021 was at $62 a barrel, and October 2021 prices were more than $80 a barrel, which means that there is an increase of about $20 over the average of the first nine months.
But if we look from another angle, how the exporting countries benefit from this new surge in prices, in terms of making good use of their development projects, or improving their production structures, then the benefit will undoubtedly be great, but if those returns are deposited in the money markets to speculate on stocks Bonds in the Western, American, or Asian markets will be useless. Likewise, if these returns are employed in spending on armaments, inter-war wars, or local conflicts, these cash returns will be of little use.