2021–2022 global energy crisis

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World fuel production and consumption

The 2021–2022 global energy shortage is the most recent in a series of cyclical energy shortages experienced over the last fifty years. It is more acutely affecting countries such as the United Kingdom[1][2] and China,[3] among others.[4]

Background[]

After the beginning of COVID-19 pandemic in 2019-2020 causing rapid drop in energy demand and the corresponding cut in oil production despite the original hesitancy caused by 2020 Russia–Saudi Arabia oil price war, OPEC responded slowly to the demand recovery under new normal, causing supply-demand imbalance, and the 2021–2022 global supply chain crisis further stressed the delivery of extracted petroleum.

In December 2020, after months of restrictions, China fully blocked coal imports from Australia, which was China's largest source of imported coal.[5]

Brazil's worst drought in almost a century is threatening its electricity supply.[6][7] Brazil relies on hydropower for two-thirds of its electricity.[8] In the West Pacific, El Nino's impact on typhoon path have resulted in lowered waterfall throughout Southern China and Taiwan region in year 2020–2021, which also affected hydroelectric power supply in the area.

Euractiv reported that European Commissioner for Climate Action Frans Timmermans told the European Parliament in Strasbourg that "about one fifth" of the energy price increase "can be attributed to rising CO2 pricing on the EU's carbon market".[9]

The Russian military buildup outside Ukraine and subsequent invasion have also threatened the energy supply from Russia to Europe, causing European countries to diversify their source of energy import.

Effects by location[]

Asia[]

China[]

China is facing its worst energy crisis in decades.[10] The Guardian reported that "Companies in the industrial heartlands have been told to limit consumption, residents have been subjected to rolling blackouts, and annual light shows have been cancelled."[11]

Prices for industrial metals such as copper, zinc and aluminium have soared to record levels as energy shortages in China drive up costs for electricity and natural gas.[12][13] The price of aluminium has reached a 13-year high.[14][15]

The energy crisis has intensified pressures on China ahead of the 2022 Winter Olympics.[16][17] Al-Jazeera reported that "China’s energy crisis is partially of its own making as President Xi Jinping tries to ensure blue skies at the Winter Olympics in Beijing next February and show the international community he’s serious about de-carbonizing the economy."[18]

The energy crunch in Europe and Asia has allowed the Kremlin to forge its energy connections with China as Gazprom announced another gas pipeline with China, Power of Siberia 2, after the finalisation of the existing Power of Siberia in 2019. The second project between Moscow and Beijing, planned to deliver gas from the Yamal Peninsula, will be signed off in late 2022.[19]

India[]

India experienced power outages in Uttar Pradesh, Rajasthan, Punjab, Jharkhand, Maharashtra, and Kerala as the country's coal stockpiles at power plants were dangerously low.[20][21] In order to mitigate the outage, coal supplies were re-routed from industries to power plants.

In October 2021, the crisis reached its peak, with 1/3 of coal power plants having less than three days of supply.[22] A complete power failure was averted as Coal India, which supplies 80% of coal output, ramped up coal production.

South Korea[]

Diesel vehicle drivers had difficulties buying diesel exhaust fluid in South Korea.[23][24]

Europe[]

EU natural gas price
European Countries Dependence On Russian Natural Gas[25]

Due to a combination of unfavourable conditions, which involved soaring demand of natural gas, its diminished supply from U.S., Norway and Russia to the European markets, less power generation by renewable energy sources such as wind, water and solar energy, and cold winter that left European gas reservoirs depleted, Europe faced steep increases in gas prices in 2021.[26][27][28][29] Russia has fully supplied on all long-term contracts, but has not supplied extra gas on the spot market;[30] in the first half of 2021, Russia supplied over 3 billion m³/week (almost half of EU's imports), and around 2.3 billion m³/week in the second half of 2021.[31] In October 2021, the Economist Intelligence Unit reported that Russia had limited extra gas export capacity because of its own high domestic demands with production near its peak.[30][32] On 27 October 2021, Russian President Vladimir Putin authorised state-controlled energy giant Gazprom to start pumping extra natural gas into European gas storage sites once Russia finishes filling its own gas inventories, which may happen by November 8.[33][34] This caused the sharp drop in global prices on energy resources and temporarily alleviated the energy crisis in Europe.

The Groningen gas field in the Netherlands, Europe's largest natural gas field, will stop production by mid-2022. Reuters reported that "extraction quickly became problematic in recent years, as a series of tremors caused by gas production damaged houses and buildings in the region."[35][36]

Some critics blamed the European Union Emissions Trading System (EU ETS) and closure of nuclear plants for contributing to the energy crisis.[37][38] The Merkel government in Germany decided in 2011 to phase out both nuclear power and coal plants.[39]

U.S. exports of liquefied natural gas (LNG) to China and other Asian countries surged in 2021, with Asian buyers willing to pay higher prices than European importers.[40] In late 2021 and early 2022, half or more of US LNG exports went to Europe.[41]

In late 2021, European energy prices continued to increase, while an unprecedented energy crunch, particularly for natural gas, weighed heavily on economic growth indicators. Norway increased its export to EU to 2.9 billion m³/week.[31] Liquified natural gas markets were tight for the entire 2021. The Kremlin has been accused to tout the necessity of Nord Stream 2, but some energy analysts view energy shortages in Europe as self-inflicted, and blame European Union sanctions of Russian entities, among other reasons.[42]

Europe's energy crisis was spreading to the fertilizer and food industries.[43][44] According to Julia Meehan, the head of fertilizers for the commodity price agency ICIS, "We are seeing record prices for every fertiliser type, which are all way above the previous highs in 2008. It’s very, very serious. People don’t realise that 50% of the world’s food relies on fertilisers."[45]

On 16 November 2021, European natural gas prices rose by 17% after Germany's energy regulator temporarily suspended approval of the Nord Stream 2 natural gas pipeline from Russia to Germany.[46][47]

Belgium[]

A study by the Commission for the Regulation of Electricity and Gas shows a 30% increase in the price of electricity and 50% in the price of natural gas in Belgium.[48]

France[]

Surging energy prices for natural gas and heating oil have caused higher living expenses, particularly for renters and rural land owners. Socio-economic measures were taken to counter-act inflationary pressures that disproportionally affect working families and immigrants. The 2021 energy crisis, complicated by political tensions in Eastern Europe and scarce natural gas supplies, have cost the French state an additional 580 million euros ($685 million) per year.[49]

Moldova[]

In 2021, Moldova had a gas crisis that lasted for several months until the signing of a new contract with the Russian state-controlled gas company Gazprom with a duration of 5 years. There were allegations that Russia used this crisis to its advantage as a consequence of Moldova having elected the pro-European now president Maia Sandu over the pro-Russian candidate Igor Dodon in 2020, although this was denied by Russia.[50]

Spain[]

In Spain, electricity prices rose more than 200%.[51]

On 1 November 2021, Algeria stopped natural gas exports to Spain through the Maghreb–Europe Gas Pipeline, opting instead to supply Spain through the Medgaz pipeline.[52][53] Algeria is Spain's largest gas supplier.[52][53]

United Kingdom[]

Great Britain Natural Gas Prices
Main articles: 2021 United Kingdom fuel supply crisis and 2021 United Kingdom natural gas supplier crisis

From August 2021, high European wholesale natural gas prices caused 31 domestic suppliers in the United Kingdom to go out of business, out of a total of 70 that had been in operation at the beginning of the year.[54][55][56] In September 2021, panic buying of petrol and diesel fuel by consumers in the United Kingdom caused serious disruption to the supply of road fuel.[57]

North America[]

United States[]

Energy Secretary Jennifer Granholm blamed the OPEC oil cartel led by Saudi Arabia and the U.S. gas and petroleum industry for rising motor fuel prices in the United States.[58][59][60] As the Financial Times reported on November 4: "The White House has said OPEC+ risks imperiling the global economic recovery by refusing to speed up oil production increases and warned the U.S. was prepared to use ‘all tools’ necessary to lower fuel prices."[61]

According to the U.S. Energy Information Administration, American families heating with propane can expect to pay 54% more in winter 2021/22 than they did last year.[62]

On 23 November 2021, the Biden administration announced it would release 50 million barrels of oil from the Strategic Petroleum Reserve.[63]

Due to the 2022 Russian invasion of Ukraine and subsequent international sanctions during the Russo-Ukrainian War against Russia, oil prices worldwide soared. In the beginning of March 2022, the price of Brent Crude passed US$113 a barrel, the highest level since June 2014, while West Texas Intermediate was trading at just under US$110 a barrel.[64] On 8 March, President Joe Biden ordered a ban on imports of Russian oil, gas and coal to the US.[65]

Responses[]

The UK government has turned to Qatar to seek a long-term gas deal to ensure a stable supply of liquefied natural gas (LNG) to the UK.[66] Prime Minister Boris Johnson asked Sheikh Tamim bin Hamad Al Thani, the Emir of Qatar, for help during a meeting at the UN General Assembly in September 2021.[67][68] EU suspended an antitrust investigation into QatarEnergy in February 2022.[69]

In October 2021, U.S. producer Venture Global LNG signed three long-term supply deals with China's state-owned Sinopec to supply liquefied natural gas. China's imports of U.S. natural gas will more than double.[70]

On 28 October 2021, natural gas prices in Europe dropped by at least 12% after Gazprom announced it would increase supplies to Europe after Russian domestic storage sites were filled on about 8 November. Norway had increased gas production and lower coal prices in China are also helping lower natural gas prices.[71][33]

Hungarian Prime Minister Viktor Orbán blamed a record-breaking surge in energy prices on the European Commission’s Green Deal plans.[72] Politico reported that "Despite the impact of high energy prices, [EU Commissioner for Energy] Kadri Simson insisted that there are no plans to backtrack on the bloc's Green Deal, which aims to make the EU climate neutral by 2050."[73] Speaking at the COP26 climate summit in Glasgow, Czech Prime Minister Babiš denounced the European Green Deal,[74] saying that the European Commission "continues to propose dangerous policies such as the ban on combustible engines in 2035, or carbon allowances for transport and individual housing. Due to improper legislature and speculation, the price of emission allowances has gone out of control, resulting in the surging costs of electricity."[75]

Countries by natural gas proven reserves (2018), based on data from CIA World Factbook. Iran has the world's second largest natural gas reserves after Russia.

U.S. President Joe Biden's national security adviser Jake Sullivan released a statement calling on OPEC+ to boost oil production to "offset previous production cuts that OPEC+ imposed during the pandemic until well into 2022."[76] On 28 September 2021, Sullivan met in Saudi Arabia with Saudi Crown Prince Mohammed bin Salman to discuss the high oil prices.[77] The price of oil was about $80 by October 2021, the highest since 2014.[78][79] USA delivered 16 billion cubic meters of LNG to Europe in January 2022, and 6 billion in February.[80]

Iranian oil minister Javad Owji said if U.S.-led sanctions on Iran's oil and gas industry are lifted, Iran will have every capability to tackle the global energy crisis.[81][82]

Qatar's energy minister Saad Sherida al-Kaabi stated that there "is a huge demand from all our customers, and unfortunately we cannot cater for everybody. Unfortunately, in my view, this is due to the market not investing enough in the [gas] industry."[83]

European Commission President Ursula von der Leyen said that "Europe today is too reliant on gas and too dependent on gas imports. The answer has to do with diversifying our suppliers ... and, crucially, with speeding up the transition to clean energy."[84][85]

European Commissioner for Climate Action Frans Timmermans suggested "the best answer to this problem today is to reduce our reliance on fossil fuels."[86]

In late October 2021, Russian ambassador Andrei Kelin denied that Russia is withholding gas supplies for political reasons. According to the ambassador, delivery of natural gas through Ukraine has been increased by up to 15% for November 2021, but it was unclear whether this increase would have an immediate effect on the natural gas supply in Europe. Furthermore, such increase in gas delivery was hindered by a lack of modernization of the Ukrainian gas pipelines, according to the source.[87]

See also[]

References[]

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