Rather than recovering from the COVID-19 shock awash in fuel, as one might expect after an economic downturn, the globe is facing a new energy crisis not seen since the 1970s. Based on energy shortages in China, India, and Germany, Asian and European gas prices are at all-time highs, oil prices are at three-year highs, and coal prices are increasing. The increase in demand is primarily due to recovering economies and the threat of harsh weather in Europe and northeast Asia. China is hoarding local coal and gas reserves, while Russia is hesitant to supply Western Europe with gas. Closer to home, gas prices in Australia are rising, but they may soon fall.
Fears of fuel scarcity have prompted panic buying in the United Kingdom due to a shortage of truck drivers. Numerous European truck drivers returned to their own countries after Brexit and never returned. The UK’s predicament was exacerbated by its so-called “windless summer,” during which renewable energy generation was significantly lower than usual. This puts tremendous pressure on electricity generation, as wind generates about 24% of the total. Britain has moved away from coal as the source of electricity, and with limited emergency supplies, reverting to coal will be tough. Prime Minister Boris Johnson continues to be dedicated to wind power, saying he wants the United Kingdom to become the “Saudi Arabia of wind power” within a decade, with offshore wind farms producing sufficient electricity to power every home in the country.
Oil on a roll
The oil prices have risen as a result of the dry summer and German and British issues obtaining Russian gas. These price hikes will soon affect Australia, which imports 80 percent of its petrol, diesel, and jet fuel. OPEC+ (OPEC and a group of the oil producers led by Russia) has agreed to increase output, but only in small increments. prices will fall if and when Germany and Britain address their gas supply difficulties with Russia, which might happen by mid-2022. This will put a strain on Australia’s valuable long-term supply deals with Japan, South Korea, and Taiwan, which are set to expire in the next few years. Other countries in the Indo-Pacific, such as Vietnam and India, may pick up the slack by investing extensively in their gas infrastructure.
Because of the gas shortage, countries are forced to rely on coal for energy generation and manufacturing. Thermal coal costs in Asia continue to rise to new highs. There isn’t enough coal in Asia to meet anticipated demand. Chinese demand has increased as a result of a chilly winter followed by a scorching summer and greater economic growth. It is the primary cause of China’s looming electricity problem. As inventories run low, China, which cut back on coal use just several months ago to achieve emission standards, is returning to the market. India is in a similar situation, as its coal reserves are depleting.