"'Bigger and Longer Lasting Than the Oil Shock'
Energy Demand and Prices Surge... Warning Signs Due to Investment Shortfall and Ukraine War
Former US Energy Advisor: 'Shockingly Unprepared'"
[Asia Economy Reporter Yoon Seul-gi] With the prices of almost all energy sources?from gasoline to natural gas and coal?soaring, concerns have been raised that the world could face a crisis greater than the 1970s oil shock.
On the 2nd (local time), according to foreign media including CNN, Fatih Birol, Executive Director of the International Energy Agency (IEA), stated, "We are now experiencing an oil crisis, a gas crisis, and an electricity crisis simultaneously," adding, "This energy crisis is much larger and expected to last longer than the oil crises of the 1970s and 1980s."
Birol particularly warned about supply bottlenecks of gasoline and diesel in Europe and the issue of natural gas rationing during next winter in Europe. This is due to recent European attempts to impose sanctions and other measures to move away from Russian crude oil and natural gas, which could lead to a sharp rise in energy prices.
Joe McMonigle of the International Energy Forum (IEF) also described the current situation?marked by strong demand in the energy sector, underinvestment due to the COVID-19 pandemic, and supply disruptions caused by the Ukraine war?as a "perfect storm" (a massive complex crisis). He expressed concerns that it "threatens economic recovery from COVID-19, worsens inflation, fuels social unrest, and weakens efforts to save the planet from global warming."
With energy prices extremely high, abnormal weather and severe drought have made power shortages a reality. Robert McNally, former chief energy advisor to former U.S. President George W. Bush, pointed out that "the world is woefully unprepared for this crisis." The North American Electric Reliability Corporation (NERC), a nonprofit organization, also warned in a report last month that the risk of widespread blackouts this summer is increasing due to power shortages caused by rising natural gas prices.
The media analyzed that the possibility of an energy crisis is not simply a result of the Ukraine war, noting that "governments have drastically reduced investments in oil and natural gas." According to the IEF, investment in the oil and gas sector last year was only $341 billion, which is 23% lower than the pre-COVID-19 level of $525 billion.
CNN stated that, given the uncertain outlook, it is unclear how the energy crisis will end, but there are ways to alleviate the supply crisis. The media reported, "Diplomatic efforts such as ending the Ukraine war and lifting sanctions on Russia could be a 'game changer'." Other factors expected to ease the energy crisis include Iran's nuclear negotiations, a more severe economic downturn in China, and agreements by Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries (OPEC) to increase production.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
