Global energy crisis:
How did we get here and what next?
An energy crisis has now spread across the world, threatening the basic electricity systems of even the wealthiest nations.
One of the most obvious indicators of the crisis is natural gas, which has been trading up more than 130 percent in Europe since the beginning of September and over eight times higher than the same period last year. The cost of this vital commodity has also increased 85 percent in East Asia. Even in the U.S., which has an abundance of natural gas, the price has hit a 13-year high.
The outcome has been rising electricity bills, as well as genuine concerns of electricity shortages and blackouts from the UK to the U.S. – rolling blackouts in China are already underway, affecting global firms like Apple and Tesla due to the suspension of production. And there are real concerns that the impact could worsen for consumers in 2022.
Why did the energy crisis occur?
For anyone connected to or interested in global trade and the supply of essential commodities, it is natural to ask how we reached this crisis. The answer to global problems is rarely completely straightforward, but we can pinpoint some of the major factors.
We may start with Europe’s unusually long winter that stretched into spring earlier this year, causing the depletion of natural gas stocks. Then, as a surge in energy demand has accompanied the global economic recovery from COVID-19, natural gas supply has been unable to recover – in addition, Russian gas exports have fallen. Moreover, with North Sea wind falling to its slowest speed in 20 years, wind power has also been reduced – bear in mind that wind power accounts for 24 percent of electricity production in the UK.
The knock-on effect has seen nations seek fast solutions, compromising their carbon reduction goals by turning to coal – with U.S. utilities set to burn around 23 percent more coal this year, for example. But there have been significant coal supply issues too, from bad weather disrupting the trade of Indonesian coal to political obstacles standing in the way of the movement of Australian coal. In fact, the price of coal has reached an all-time high in Northwest Europe and its highest level in Asia since 2008 – the coal shortage has become so serious that it has left India on the brink of an unprecedented power crisis.
Seeking a more sustainable future
In addition to raising natural concerns about energy supply this winter, the crisis has clearly exposed how the world is not yet free from a reliance on fossil fuels.
That will no doubt be a major topic of discussion when world leaders from nearly 200 countries gather for the COP26 international climate summit in Scotland later this month. Leaders will be very keen to avoid undoing the progress made in recent years after renewables overtook fossil fuels in terms of the European Union’s electricity supply in 2020.
The energy crisis has highlighted the need to increase the supply of renewable energy. It may be that this difficult period is a particularly “bumpy patch” in the transition away from fossil fuels, according to U.S. Secretary of State Antony Blinken.
Samsung C&T Trading & Investment Group has been taking serious action in recent years to support the supply of renewable and cleaner energy. The company’s efforts include fostering diverse sources of renewable energy around the world such as solar power generation and bioenergy, promoting hydrogen as a clean energy solution, actively participating in the trade of liquified natural gas.