Energy crisis

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An energy crisis or energy shortage is any significant bottleneck in the supply of energy resources to an economy. In literature, it often refers to one of the energy sources used at a certain time and place, in particular, those that supply national electricity grids or those used as fuel in industrial development. Population growth has led to a surge in the global demand for energy in recent years. In the 2000s, this new demand – together with Middle East tension, the falling value of the US dollar, dwindling oil reserves, concerns over peak oil, and oil price speculation – triggered the 2000s energy crisis, which saw the price of oil reach an all-time high of $147.30 per barrel ($926/m3) in 2008.[ citation needed ]

Contents

Most energy crises have been caused by localized shortages, wars and market manipulation. However, the recent historical energy crises listed below were not caused by such factors.

Causes

The gasoline shortages of World War II brought about the resurgence of horse-and-wagon delivery. Door paard getrokken taxi.jpg
The gasoline shortages of World War II brought about the resurgence of horse-and-wagon delivery.

Most energy crises have been caused by localized shortages, wars and market manipulation. Some have argued that government actions like tax hikes, nationalisation of energy companies, and regulation of the energy sector shift supply and demand of energy away from its economic equilibrium. [1] However, the recent historical energy crises listed below were not caused by such factors. Market failure is possible when monopoly manipulation of markets occurs. A crisis can develop due to industrial actions like union organized strikes or government embargoes. The cause may be over-consumption, aging infrastructure, choke point disruption, or bottlenecks at oil refineries or port facilities that restrict fuel supply. An emergency may emerge during very cold winters due to increased consumption of energy.

Large fluctuations and manipulations in future derivatives can impact price. Investment banks trade 80% of oil derivatives as of May 2012, compared to 30% a decade ago. [2] This consolidation of trade contributed to an improvement of global energy output from 117,687 TWh in 2000 to 143,851 TWh in 2008. [3] Limitations on free trade for derivatives could reverse this trend of growth in energy production. Kuwaiti Oil Minister Hani Hussein stated that "Under the supply and demand theory, oil prices today are not justified," in an interview with Upstream. [4]

Pipeline failures and other accidents may cause minor interruptions to energy supplies. A crisis could possibly emerge after infrastructure damage from severe weather. Attacks by terrorists or militia on important infrastructure are a possible problem for energy consumers, with a successful strike on a Middle East facility potentially causing global shortages. Political events, for example, when governments change due to regime change, monarchy collapse, military occupation, and coup may disrupt oil and gas production and create shortages. Fuel shortage can also be due to the excess and useless use of the fuels.

Historical crises

20th century

2000s

Kuwait's Al Burqan Oil Field, the world's second-largest oil field Kuwait city 1996.jpg
Kuwait's Al Burqan Oil Field, the world's second-largest oil field

2010s

2020s

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Natural gas prices in Europe and United States
   National Balancing Point NBP (UK) natural gas prices
  Europe TTF natural gas prices
  United States Henry Hub natural gas prices

Emerging oil shortage

"Peak oil" is the period when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline. It relates to a long-term decline in the available supply of petroleum. This, combined with increasing demand, significantly increases the worldwide prices of petroleum-derived products. Most significant is the availability and price of liquid fuel for transportation.

The US Department of Energy in the Hirsch report indicates that "The problems associated with world oil production peaking will not be temporary, and past 'energy crisis' experience will provide relatively little guidance." [20]

Mitigation efforts

To avoid the serious social and economic implications a global decline in oil production could entail, the 2005 Hirsch report emphasized the need to find alternatives, at least ten to twenty years before the peak, and to phase out the use of petroleum over that time. Such mitigation could include energy conservation, fuel substitution, and the use of unconventional oil. Because mitigation can reduce the use of traditional petroleum sources, it can also affect the timing of peak oil and the shape of the Hubbert curve.

Energy policy may be reformed leading to greater energy intensity, for example in Iran with the 2007 Gas Rationing Plan in Iran, Canada and the National Energy Program and in the US with the Energy Independence and Security Act of 2007 also called the Clean Energy Act of 2007 . Another mitigation measure is the setup of a cache of secure fuel reserves like the United States Strategic Petroleum Reserve, in case of national emergency. Chinese energy policy includes specific targets within their 5-year plans.

Andrew McKillop has been a proponent of a contract and converge model or capping scheme, to mitigate both emissions of greenhouse gases and a peak oil crisis. The imposition of a carbon tax would have mitigating effects on an oil crisis.[ citation needed ] The Oil Depletion Protocol has been developed by Richard Heinberg to implement a powerdown during a peak oil crisis. While many sustainable development and energy policy organisations have advocated reforms to energy development from the 1970s, some cater to a specific crisis in energy supply including Energy-Quest and the International Association for Energy Economics. The Oil Depletion Analysis Centre and the Association for the Study of Peak Oil and Gas examine the timing and likely effects of peak oil.

Ecologist William Rees believes that

To avoid a serious energy crisis in coming decades, citizens in the industrial countries should actually be urging their governments to come to an international agreement on a persistent, orderly, predictable, and steepening series of oil and natural gas price hikes over the next two decades.

Due to a lack of political viability on the issue, government-mandated fuel prices hikes are unlikely and the unresolved dilemma of fossil fuel dependence is becoming a wicked problem. A global soft energy path seems improbable, due to the rebound effect. Conclusions that the world is heading towards an unprecedented large and potentially devastating global energy crisis due to a decline in the availability of cheap oil lead to calls for a decreasing dependency on fossil fuel.

Other ideas concentrate on design and development of improved, energy-efficient urban infrastructure in developing nations. [21] Government funding for alternative energy is more likely to increase during an energy crisis, so too are incentives for oil exploration. For example, funding for research into inertial confinement fusion technology increased during the 1970s.

Kirk Sorensen and others [22] have suggested that additional nuclear power plants, particularly liquid fluoride thorium reactors have the energy density to mitigate global warming and replace the energy from peak oil, peak coal and peak gas. The reactors produce electricity and heat so much of the transportation infrastructure should move over to electric vehicles. However, the high process heat of the molten salt reactors could be used to make liquid fuels from any carbon source.

Social and economic effects

The macroeconomic implications of a supply shock-induced energy crisis are large, because energy is the resource used to exploit all other resources. Oil price shocks can affect the rest of the economy through delayed business investment, [23] sectoral shifts in the labor market, [24] or monetary policy responses. [25] When energy markets fail, an energy shortage develops. Electricity consumers may experience intentionally engineered rolling blackouts during periods of insufficient supply or unexpected power outages, regardless of the cause.

Industrialized nations are dependent on oil, and efforts to restrict the supply of oil would have an adverse effect on the economies of oil producers. For the consumer, the price of natural gas, gasoline (petrol) and diesel for cars and other vehicles rises. An early response from stakeholders is the call for reports, investigations and commissions into the price of fuels. There are also movements towards the development of more sustainable urban infrastructure.

In 2006, survey respondents in the United States were willing to pay more for a plug-in hybrid car. New Vehicle Purchase Preference.svg
In 2006, survey respondents in the United States were willing to pay more for a plug-in hybrid car.
Global new investments in renewable energy, 2004-2010 Global-RE-Investment-VC-Eng.png
Global new investments in renewable energy, 2004–2010

In the market, new technology and energy efficiency measures become desirable for consumers seeking to decrease transport costs. [27] Examples include:

Other responses include the development of unconventional oil sources such as synthetic fuel from places like the Athabasca Oil Sands, more renewable energy commercialization and use of alternative propulsion. There may be a relocation trend towards local foods and possibly microgeneration, solar thermal collectors and other green energy sources.

Tourism trends and gas-guzzler ownership varies with fuel costs. Energy shortages can influence public opinion on subjects from nuclear power plants to electric blankets. Building construction techniques—improved insulation, reflective roofs, thermally efficient windows, etc.—change to reduce heating costs.

The percentage of businesses indicating that energy prices represent a barrier to investment has increased in 2022 (82%) as found in recent surveys, particularly for those who see it as a significant obstacle (59%). According to varied energy prices and energy intensity across nations and industries, various countries have different percentages of businesses that view energy costs as a key obstacle, ranging from 24% in Finland to 81% in Greece for example. [28]

Crisis management

An electricity shortage is felt most acutely in heating, cooking, and water supply. Therefore, a sustained energy crisis may become a humanitarian crisis. If an energy shortage is prolonged a crisis management phase is enforced by authorities. Energy audits may be conducted to monitor usage. Various curfews with the intention of increasing energy conservation may be initiated to reduce consumption. For example, to conserve power during the Central Asia energy crisis, authorities in Tajikistan ordered bars and cafes to operate by candlelight. "Crisis Looms as Bitter Cold, Blackouts Hit Tajikistan". NPR . Retrieved 10 February 2008.

In the worst kind of energy crisis energy rationing and fuel rationing may be incurred. Panic buying may beset outlets as awareness of shortages spread. Facilities close down to save on heating oil; and factories cut production and lay off workers. The risk of stagflation increases.[ citation needed ]

See also

Related Research Articles

<span class="mw-page-title-main">1979 oil crisis</span> Worldwide increase in crude oil prices following the Iranian Revolution

A drop in oil production in the wake of the Iranian revolution led to an energy crisis in 1979. Although the global oil supply only decreased by approximately four percent, the oil markets' reaction raised the price of crude oil drastically over the next 12 months, more than doubling it to $39.50 per barrel ($248/m3). The sudden increase in price was connected with fuel shortages similar to the 1973 oil crisis.

<span class="mw-page-title-main">Peak oil</span> Point in time when the maximum rate of petroleum extraction is reached

Peak oil is the point when global oil production reaches its maximum rate, after which it will begin to decline irreversibly. The main concern is that global transportation relies heavily on gasoline and diesel. Transitioning to electric vehicles, biofuels, or more efficient transport could help reduce oil demand.

<span class="mw-page-title-main">Colin Campbell (geologist)</span> British petroleum geologist (1931–2022)

Colin J. Campbell was a British petroleum geologist who predicted that oil production would peak by 2007. He claimed the consequences of this are uncertain but drastic, due to the world's dependency on fossil fuels for the vast majority of its energy. His theories have received wide attention but are disputed and have not significantly changed governmental energy policies at this time. To deal with declining global oil production, he proposed the Rimini protocol.

<span class="mw-page-title-main">2000s energy crisis</span> Sixfold rise in oil prices, peaking in 2008

From the mid-1980s to September 2003, the inflation-adjusted price of a barrel of crude oil on NYMEX was generally under US$25/barrel in 2008 dollars. During 2003, the price rose above $30, reached $60 by 11 August 2005, and peaked at $147.30 in July 2008. Commentators attributed these price increases to many factors, including Middle East tension, soaring demand from China, the falling value of the U.S. dollar, reports showing a decline in petroleum reserves, worries over peak oil, and financial speculation.

Oil depletion is the decline in oil production of a well, oil field, or geographic area. The Hubbert peak theory makes predictions of production rates based on prior discovery rates and anticipated production rates. Hubbert curves predict that the production curves of non-renewing resources approximate a bell curve. Thus, according to this theory, when the peak of production is passed, production rates enter an irreversible decline.

The Argentine energy crisis was a natural gas supply shortage experienced by Argentina in 2004. After the recession triggered by the Argentine economic crisis (1999-2002), Argentina's energy demands grew quickly as industry recovered, but extraction and transportation of natural gas, a cheap and relatively abundant fossil fuel, did not match the surge.

Energía Argentina Sociedad Anónima, mostly known for its acronym ENARSA, is a state owned company in Argentina. It is engaged in the exploitation of petroleum and natural gas, and the production, industrialization, transport and trade of these and of electricity.

<span class="mw-page-title-main">Energy industry</span> Industries involved in the production and sale of energy

The energy industry is the totality of all of the industries involved in the production and sale of energy, including fuel extraction, manufacturing, refining and distribution. Modern society consumes large amounts of fuel, and the energy industry is a crucial part of the infrastructure and maintenance of society in almost all countries.

<span class="mw-page-title-main">Price of oil</span> Spot price of a barrel of benchmark crude oil

The price of oil, or the oil price, generally refers to the spot price of a barrel of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent Crude, Dubai Crude, OPEC Reference Basket, Tapis crude, Bonny Light, Urals oil, Isthmus, and Western Canadian Select (WCS). Oil prices are determined by global supply and demand, rather than any country's domestic production level.

<span class="mw-page-title-main">Energy security</span> National security considerations of energy availability

Energy security is the association between national security and the availability of natural resources for energy consumption. Access to cheaper energy has become essential to the functioning of modern economies. However, the uneven distribution of energy supplies among countries has led to significant vulnerabilities. International energy relations have contributed to the globalization of the world leading to energy security and energy vulnerability at the same time.

<span class="mw-page-title-main">Fossil fuel phase-out</span> Gradual reduction of the use and production of fossil fuels

Fossil fuel phase-out is the gradual reduction of the use and production of fossil fuels to zero, to reduce deaths and illness from air pollution, limit climate change, and strengthen energy independence. It is part of the ongoing renewable energy transition, but is being hindered by fossil fuel subsidies.

Hydrocarbon economy is a term referencing the global hydrocarbon industry and its relationship to world markets. Energy used mostly comes from three hydrocarbons: petroleum, coal, and natural gas. Hydrocarbon economy is often used when talking about possible alternatives like the hydrogen economy.

An energy market is a type of commodity market on which electricity, heat, and fuel products are traded. Natural gas and electricity are examples of products traded on an energy market. Other energy commodities include: oil, coal, carbon emissions, nuclear power, solar energy and wind energy. Due to the difficulty in storing and transporting energy, current and future prices in energy are rarely linked. This is because energy purchased at a current price is difficult to store and then sell at a later date. There are two types of market schemes : spot market and forward market.

<span class="mw-page-title-main">Petroleum in the United States</span>

Petroleum has been a major industry in the United States since the 1859 Pennsylvania oil rush around Titusville, Pennsylvania. Commonly characterized as "Big Oil", the industry includes exploration, production, refining, transportation, and marketing of oil and natural gas products. The leading crude oil-producing areas in the United States in 2023 were Texas, followed by the offshore federal zone of the Gulf of Mexico, North Dakota and New Mexico.

<span class="mw-page-title-main">Russia in the European energy sector</span>

Russia supplies a significant volume of fossil fuels to other European countries. In 2021, it was the largest exporter of oil and natural gas to the European Union, (90%) and 40% of gas consumed in the EU came from Russia.

<span class="mw-page-title-main">1970s energy crisis</span> Subclass of energy crisis

The 1970s energy crisis occurred when the Western world, particularly the United States, Canada, Western Europe, Australia, and New Zealand, faced substantial petroleum shortages as well as elevated prices. The two worst crises of this period were the 1973 oil crisis and the 1979 energy crisis, when, respectively, the Yom Kippur War and the Iranian Revolution triggered interruptions in Middle Eastern oil exports.

Energy in Iraq plays a crucial role in both the national economy and the global energy markets due to the country's vast oil reserves and significant status within the Organization of the Petroleum Exporting Countries (OPEC).

A global energy crisis began in the aftermath of the COVID-19 pandemic in 2021, with much of the globe facing shortages and increased prices in oil, gas and electricity markets. The crisis was caused by a variety of economic factors, including the rapid post-pandemic economic rebound that outpaced energy supply, and escalated into a widespread global energy crisis following the Russian invasion of Ukraine. The price of natural gas reached record highs, and as a result, so did electricity in some markets. Oil prices hit their highest level since 2008.

The 2020s commodities boom refers to the rise of many commodity prices in the early 2020s following the COVID-19 pandemic. The COVID-19 recession initially made commodity prices drop, but lockdowns, supply chain bottlenecks, and dovish monetary policy limited supply and created excess demand causing a commodity super cycle rise.

The 2021–2022 global energy crisis has caused varying effects in different parts of the world.

References

  1. ↑ Kumail Kazmi (4 September 2021). "Essay on Energy Crisis". Smadent. Archived from the original on 4 September 2021. Retrieved 5 September 2021.
  2. ↑ F. William Engdahl (18 March 2012). "Behind Oil Price Rise: Peak Oil or Wall Street Speculation?". Axis of Logic. Retrieved 21 March 2012.
  3. ↑ Eenergiläget in Sweden 2012 figure 49000 and 53
  4. ↑ "Kuwait says high oil price not justified". UpStreamOnline. Associated Press. 12 March 2012. Retrieved 21 March 2012.
  5. ↑ "Coal shortage has China living on the edge". Archived from the original on 16 January 2009. Retrieved 8 March 2008.
  6. ↑ "China's Guangdong faces severe power shortage". Reuters . 6 March 2008. Archived from the original on 18 July 2012. Retrieved 8 March 2008.
  7. ↑ "TABLE-China power shortage forecasts by region". Reuters . 2 June 2011. Archived from the original on 6 February 2012. Retrieved 12 June 2011.
  8. ↑ "Mbeki in pledge on energy crisis" . Financial Times. Archived from the original on 10 December 2022. Retrieved 10 February 2008.
  9. ↑ "Musharraf for emergency measures to overcome energy crisis". Associated Press of Pakistan. Archived from the original on 22 April 2007. Retrieved 10 February 2008.
  10. ↑ "Pakistan's PM announces energy policy to tackle crisis". BBC. 22 April 2010. Retrieved 22 April 2010.
  11. ↑ Tollefson, Jeff (2008). "Energy crisis upsets platinum market". Nature . 451 (7181): 877. Bibcode:2008Natur.451..877T. doi: 10.1038/451877a . PMID   18288152. S2CID   46240720.
  12. ↑ "Israel cannot shirk its responsibility for Gaza's electricity crisis", B'Tselem, 16 January 2017
  13. ↑ Palestinian Authority halts payments for Israeli electricity to Gaza: Israel, Reuters, 27 April 2017
  14. ↑ Gaza's electricity crisis sheds light on gap between social classes, al-Monitor, March 2016
  15. ↑ The humanitarian impact of Gaza's electricity and fuel crisis Archived 22 March 2017 at the Wayback Machine , UN OCHA, March 2014
  16. ↑ "Covid is at the center of world's energy crunch, but a cascade of problems is fueling it". NBC News. 8 October 2021.
  17. ↑ "Energy crisis: The blame game has begun - but are some of the claims just hot air?". Sky News. 22 September 2021.
  18. ↑ "Don't Expect OPEC to Keep You Warm This Winter". Bloomberg. 17 October 2021.
  19. ↑ Shirin Jaafari (22 November 2021). "Lebanon's electricity crisis means life under candlelight for some, profits for others".
  20. ↑ "DOE Hirsch Report" (PDF). Archived from the original (PDF) on 15 December 2009. Retrieved 14 January 2012.
  21. ↑ Vittorio E. Pareto, Marcos P. Pareto (August 2008). "The Urban Component of the Energy Crisis". SSRN   1221622.{{cite journal}}: Cite journal requires |journal= (help)
  22. ↑ "Super Fuel: Thorium, The Green Energy Source For The Future", Macmillan, 2012.
  23. ↑ Bernanke, Ben S. (February 1983). "Irreversibility, Uncertainty, and Cyclical Investment" (PDF). The Quarterly Journal of Economics. 98 (1): 85–106. doi:10.2307/1885568. JSTOR   1885568. Archived from the original (PDF) on 4 September 2014.
  24. ↑ Hamilton, James D. (1988). "A Neoclassical Model of Unemployment and the Business Cycle". Journal of Political Economy. 96 (3): 593–617. doi:10.1086/261553. ISSN   0022-3808. JSTOR   1830361. S2CID   153422483.
  25. ↑ Bernanke, Ben; Gertler, Mark; Watson, Mark (1997). "Systematic Monetary Policy and the Effects of Oil Price Shocks" (PDF). Brookings Papers on Economic Activity. 28 (1): 91–157. doi:10.2307/2534702. JSTOR   2534702. Archived (PDF) from the original on 13 July 2017.
  26. ↑ Bloomberg New Energy Finance, UNEP SEFI, Frankfurt School, Global Trends in Renewable Energy Investment 2011 Archived 13 January 2013 at archive.today
  27. ↑ Bergin, Tom (30 January 2008). "High Oil Prices Boost Energy Efficiency - Report". www.planetark.org. Archived from the original on 17 October 2015. Retrieved 26 October 2015.
  28. ↑ Bank, European Investment (8 November 2022). EIB Investment Survey 2022 - EU overview. European Investment Bank. ISBN   978-92-861-5397-6.

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