The world is experiencing “its first true global energy crisis,” said Fatih Birol, president of the International Energy Agency (IEA). The war in Ukraine and its impact on gas, the lack of oil and the return of demand from China are a perfect cocktail that is tightening the rope to levels we have not seen since 1973.
This winter can be quiet, but it can also be the trigger for an even more difficult situation. From the international organization, created precisely after the oil crisis, they warn of the risk we face.
There is no energy for everyone. Contrary to that of 1973, where it was a problem of prices and influences, in the current crisis there is a fact that makes it much more real: the lack of energy for all. Take the case of gas. Unless it greatly reduces its consumption, Europe needs some 55,000 million cubic meters of gas (BCM) to replace Russian gas, however the world’s capacity for liquefied natural gas will only be 20 BCM in 2023. And the rest of the countries will also want your part.
Something similar happens with oil. OPEC has reduced the production forecast to about 2 million barrels per day. This is close to what is already in demand, so the price could rise again. This lack of oil also has its implication with Russia. As explained by the United States Treasury Secretary to Reuters, it will take at least 80 to 90% of the Russian oil that remains outside the agreement to meet demand.
A crisis that will especially hit Europe in 2023. Despite the fact that Europe’s decisions are dragging down other countries, according to the IEA, Europe will be the region most affected by the energy crisis. Gas reserves are at maximum and there is no fear for this winter.
“Unless we have a long, extremely cold winter, unless there are some surprises in terms of what we’ve seen, for example the Nord Stream burst, Europe should make it through this winter,” Birol explains. The story for early 2023 is very different. Reserves in Spain last about 50 days, but if during this winter they begin to decline rapidly, by February-March we may begin to see how the price shoots up again.
At the gates of recession. The siren songs of the recession sound very loud. And this energy crisis is very responsible for it. The big economies right now are living in an inflationary spiral, but the measures suggest that many citizens are going to lose purchasing power. This, together with the fact that the price of energy will continue to be very high, will contribute to aggravating the situation.
Analysts such as Economic Intelligence point out that Europe is going to have problems with energy until 2024 and, even if demand is met, we will have a less competitive market than the equivalent in the United States or Asia. An effect that is already noticeable in the closure of the European headquarters of some large foreign companies such as BASF, alluding to energy reasons.
Trusting the rush of renewables. This crisis may be the “turning point” that renewable energies needed to become the reference option, explains the president of the International Energy Agency. The energy transition is not only a promise to fight climate change. Now it has become a security issue. The quicker Europe becomes solar- or wind-based, the quicker it can avoid the shock of reliance on Russian energy.
This firm commitment to renewables is reflected in the IEA numbers. While calculations pointed to an increase in renewable capacity by 8% for this year, it is finally expected to be 20%, with about 400 gigawatts of capacity added. Much better numbers than expected that reflect the work of Europe to try to cope with an unprecedented energy crisis.
Image | Gerard Lakerveld