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It’s Not Just High Oil Prices. It’s a Full-Blown Energy Crisis.

It’s Not Just High Oil Prices. It’s a Full-Blown Energy Crisis.

Thursday, 28 April, 2022 - 04:30

Americans are worrying about their gas prices. Germans are turning down their heating. Peru has seen violent protests — and a violent crackdown on them — over rising fuel costs. Nigeria’s national energy grid recently collapsed. And that’s just this spring. Focused on the future, the United Nations Intergovernmental Planet on Climate Change warned in a report on April 4 that too much investment is going into fossil fuels and too little into the energy transition that could prevent a devastating increase in global temperatures.


This persistent, simmering crisis around energy, its cost and the politics around it will not end soon.


Vladimir Putin has escalated this crisis. His invasion of Ukraine has pushed up prices and forced Europe — until now the largest importer of Russian natural gas — to begin an attempt to end its longstanding dependence on Russian gas. But Mr. Putin didn’t cause this crisis alone. For nearly a year before Russia’s invasion of Ukraine, supply struggled to meet demand, causing prices to surge. For the best part of a decade, the American shale boom met the world’s rising energy needs, but in 2020 shale oil output slumped and the rate of growth of shale gas fell.


President Biden’s hope that he could focus his presidency on the climate, not fixing the world’s oil supply, shattered. Unable to resurrect a nuclear deal with Iran that would have restored Iranian oil to world markets, Mr. Biden began last year to ask other producers to increase their output. His pressure was to no avail. Meanwhile, China’s demand for gas imports grew by 20 percent over 2021, helping push European gas prices up nearly sixfold between March and December.


That was already putting pressure on politicians, but the Putin shock — oil prices rose by one third in the first two weeks after the invasion — has exposed just how much governments fear rising fossil fuel costs, never mind their optimistic rhetoric that high prices will encourage a transition to greener energy sources. By releasing one million barrels of oil a day from the Strategic Petroleum Reserve between May and November, Mr. Biden will inject the largest-ever volume of emergency American supply into the market since the stockpile was established in 1975. It will provide, at best, temporary relief. And as Asian countries start to adjust to a world in which ships bearing liquid natural gas turn away from the Pacific and redirect to Europe, their demand for coal is going up.


All of this means higher energy prices for everyone, everywhere — unless economies return to the recessions they endured during the pandemic, an option no one hopes for.


The parallels with the 1970s are obvious. The oil shock in the wake of the Yom Kippur War in October 1973, was extremely disruptive economically and geopolitically. That first shock was followed in 1978-79 by the revolution in Iran and Iraq’s invasion of Iran, plunging the two oil producers into a long war.


Then, one geopolitical era ­— with the United States as the world’s largest oil producer and Britain as (when Washington let it act) the military guarantor of Western energy interests in the Middle East — unraveled. As the Arab states seized control of production and prices from the seven big Anglo-American companies that had controlled oil in the Middle East for decades, Western economies stagnated under the inflationary pressure, supercharging protests, strikes and electoral realignments across Western democracies.


What lies ahead promises to be more disorderly — and ultimately transformative — than the events of the 1970s. This is, indeed, a bigger disruption. During the geopolitical upheaval of the 1970s, the physical supply of oil from the world’s reserves was never the issue. Now, with Asian energy demand vastly higher than it was, it is. And demand for gas and coal may well also exceed worldwide output over the next few years. We appear to have entered a time when countries will have to compete for the world’s remaining accessible fossil fuels and governments openly choose geopolitical alliances to secure them.


Look to the Mediterranean, for an example. Europe’s decoupling from Russia will intensify the geopolitical tensions over gas around the sea. In the eastern Mediterranean, Turkey resents its exclusion from energy projects and has been increasingly confrontational in asserting its interests. When Turkey struck a deal with Libya in November 2019 to claim new maritime economic boundaries for itself in the eastern Mediterranean, European Union leaders denounced the agreement as a violation of Greek and Cypriot sovereignty and incompatible with United Nations law. Now the route for a pipeline to bring eastern Mediterranean gas to Europe is causing tensions, not just between Turkey and its neighbors, but also within NATO.


On the other side of the Mediterranean, Algeria is another potential energy source for Europe. But this, too, comes with geopolitical complications: The state-owned Algerian energy firm Sonatrach announced last month it might increase gas prices to Spain after Madrid withdrew support for Algeria in mid-March over the longstanding dispute between Algeria and Morocco over the Western Sahara.


Less Russia also means more trouble in the Middle East. Without Russian help, another Iran nuclear deal becomes less likely, even as Moscow’s war amplifies all of Mr. Biden’s incentives to restore Iran’s energy exports. Rather than breaking with Russia, Arab oil producers appear to have doubled down on OPEC Plus, the world’s new oil cartel with an implicit anti-American bent.


It’s not just international politics that are being shaped by the sustainability of present energy consumption. Domestic politics are being shaken up, too.


By damning oil companies that aren’t ramping up production, Mr. Biden has decided to privilege the voters desperate for lower immediate prices over the Democrats who insist the climate crisis should remain the priority. For the European Union, the fact that European consumers are filling Moscow’s war coffers has forced unpalatable ethical issues to the surface. As the prime minister of Italy, Mario Draghi, asked Italians: “Do you prefer peace or the air conditioning on?”


The New York Times


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