ENERGY CRISIS

More specifically, the term is used to refer to a shortage of a specific energy source
at a specific time in a specific place.
The causes of energy crises include resource shortages, wars, and market
manipulation.
The effects include rising energy prices, damaged economies, and renewed interest
in alternative energy.

Global Energy Crisis

What is the energy crisis?
Energy markets began to tighten in 2021 because of a variety of
factors, including the extraordinarily rapid economic rebound following the
pandemic. But the situation escalated dramatically into a full-blown global energy
crisis following Russia’s invasion of Ukraine in February 2022. 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.

Higher energy prices have contributed to painfully high inflation, pushed families into
poverty, forced some factories to curtail output or even shut down, and slowed
economic growth to the point that some countries are heading towards severe
recession. Europe, whose gas supply is uniquely vulnerable because of its historic
reliance on Russia, could face gas rationing this winter, while many emerging
economies are seeing sharply higher energy import bills and fuel shortages.

While today’s energy crisis shares some parallels with the oil shocks of the 1970s,
there are important differences. Today’s crisis involves all fossil fuels, while the
1970s price shocks were largely limited to oil at a time when the global economy was
much more dependent on oil, and less dependent on gas. The entire word economy
is much more interlinked than it was 50 years ago, magnifying the impact. That’s why
we can refer to this as the first truly global energy crisis.
Some gas-intensive manufacturing plants in Europe have curtailed output because
they can’t afford to keep operating, while in China some have simply had their power
supply cut. In emerging and developing economies, where the share of household
budgets spent on energy and food is already large, higher energy bills have
increased extreme poverty and set back progress towards achieving universal and
affordable energy access. Even in advanced economies, rising prices have impacted
vulnerable households and caused significant economic, social and political strains.
Climate policies have been blamed in some quarters for contributing to the recent
run-up in energy prices, but there is no evidence. In fact, a greater supply of clean
energy sources and technologies would have protected consumers and mitigated
some of the upward pressure on fuel prices.
What is causing it?
Energy prices have been rising since 2021 because of the rapid economic recovery,
weather conditions in various parts of the world, maintenance work that had been
delayed by the pandemic, and earlier decisions by oil and gas companies and
exporting countries to reduce investments. Russia began withholding gas supplies to
Europe in 2021, months ahead of its invasion of Ukraine. All that led to already tight
supplies.

Russia’s attack on Ukraine greatly exacerbated the situation. The United States
and the EU imposed a series of sanctions on Russia and many European countries
declared their intention to phase out Russian gas imports completely. Meanwhile,
Russia has increasingly curtailed or even turned off its export pipelines. Russia is by
far the world’s largest exporter of fossil fuels, and a particularly important supplier to
Europe. In 2021, a quarter of all energy consumed in the EU came from Russia.

As Europe sought to replace Russian gas, it bid up prices of US, Australian and
Qatari ship-borne liquefied natural gas (LNG), raising prices and diverting supply
away from traditional LNG customers in Asia. Because gas frequently sets the price
at which electricity is sold, power prices soared as well. Both LNG producers and
importers are rushing to build new infrastructure to increase how much LNG can be
traded internationally, but these costly projects take years to come online.

Oil prices also initially soared as international trade routes were reconfigured after
the United States, many European countries and some of their Asian allies said they
would no longer buy Russian oil. Some shippers have declined to carry Russian oil
because of sanctions and insurance risk. Many large oil producers were unable to
boost supply to meet rising demand – even with the incentive of sky-high prices –
because of a lack of investment in recent years. While prices have come down from
their peaks, the outlook is uncertain with new rounds of European sanctions on
Russia kicking in later this year.

What is being done?

Some governments are looking to cushion the blow for customers and businesses,
either through direct assistance, or by limiting prices for consumers and then paying
energy providers the difference. But with inflation in many countries well above target
and budget deficits already large because of emergency spending during the Covid-
19 pandemic, the scope for cushioning the impact is more limited than in early 2020.
Rising inflation has triggered increases in short-term interest rates in many countries,
slowing down economic growth.

Europeans have rushed to increase gas imports from alternative producers such as
Algeria, Norway and Azerbaijan. Several countries have resumed or expanded the
use of coal for power generation, and some are extending the lives of nuclear plants
slated for de-commissioning. EU members have also introduced gas storage
obligations, and agreed on voluntary targets to cut gas and electricity demand by
15% this winter through efficiency measures, greater use of renewables, and support
for efficiency improvements.

To ensure adequate oil supplies, the IEA and its members responded with the
two largest ever releases of emergency oil stocks. With two decisions – on 1 March
2022 and 1 April – the IEA coordinated the release of some 182 million barrels of
emergency oil from public stocks or obligated stocks held by industry. Some IEA
member countries independently released additional public stocks, resulting in a total
of over 240 million barrels being released between March and November 2022.
The IEA has also published action plans to cut oil use with immediate impact, as well
as plans for how Europe can reduce its reliance on Russian gas and how common
citizens can reduce their energy consumption.

The invasion has sparked a reappraisal of energy policies and priorities, calling into
question the viability of decades of infrastructure and investment decisions, and
profoundly reorientating international energy trade. Gas had been expected to play a
key role in many countries as a lower-emitting "bridge" between dirtier fossil fuels
and renewable energies. But today’s crisis has called into question natural gas’
reliability.
The current crisis could accelerate the rollout of cleaner, sustainable renewable
energy such as wind and solar, just as the 1970s oil shocks spurred major advances
in energy efficiency, as well as in nuclear, solar and wind power. The crisis has also
underscored the importance of investing in robust gas and power network
infrastructure to better integrate regional markets. The EU’s RePowerEU, presented
in May 2022 and the United States’ Inflation Reduction Act, passed in August 2022,
both contain major initiatives to develop energy efficiency and promote renewable
energies.
Energy crisis
This article's lead section may be too short to adequately summarize the key points.
Please consider expanding the lead to provide an accessible overview of all
important aspects of the article. (October 2021)
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]

Causes
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
North Korea has had energy shortages for many years.
Zimbabwe has experienced a shortage of energy supplies for many years due to
financial mismanagement.
20th century
1970s energy crisis – caused by the peaking of oil production in major industrial
nations (Germany, United States, Canada, etc.) and embargoes from other
producers
1973 oil crisis – caused by an OAPEC oil export embargo by many of the major Arab
oil-producing states, in response to Western support of Israel during the Yom Kippur
War
1979 oil crisis – caused by the Iranian Revolution
1990 oil price shock – caused by the Gulf War
2000s
2000 fuel protests in the United Kingdom in 2000 were caused by a rise in the price
of crude oil combined with already relatively high taxation on road fuel in the UK.
2000s energy crisis – Since 2003, a rise in prices caused by continued global
increases in petroleum demand coupled with production stagnation, the falling value
of the US dollar, and a myriad of other secondary causes.
2000–2001 California electricity crisis – Caused by market manipulation by Enron
and failed deregulation; resulted in multiple large-scale power outages
2000–2008 North American natural gas crisis
2004 energy crisis in Argentina
2005, 2008 China experienced severe energy shortages towards the end of 2005
and again in early 2008. During the latter crisis they suffered severe damage to
power networks along with diesel and coal shortages.[5] Supplies of electricity in
Guangdong province, the manufacturing hub of China, are predicted to fall short by
an estimated 10 GW.[6] In 2011 China was forecast to have a second quarter
electrical power deficit of 44.85 – 49.85 GW.[7]
2007 Political riots occurring during the 2007 Burmese anti-government protests
were sparked by rising energy prices.

Kuwait's Al Burqan Oil Field, the world's second-largest oil field

2008 energy crisis in Central Asia, caused by abnormally cold temperatures and low
water levels in an area dependent on hydroelectric power. At the same time the
South African President was appeasing fears of a prolonged electricity crisis in South
Africa.[8]
2008. In February, the President of Pakistan announced plans to tackle energy
shortages that were reaching crisis stage, despite having significant hydrocarbon
reserves,.[9] In April 2010, the Pakistani government announced the Pakistan
national energy policy, which extended the official weekend and banned neon lights
in response to a growing electricity shortage.[10]
2008 South African energy crisis. The South African crisis led to large price rises for
platinum in February 2008 and reduced gold production.[11] and continues as of
2023.
2010s
2012 United Kingdom fuel crisis
2015 – Nepal experienced a major energy crisis in 2015 when India imposed an
economic blockade on Nepal. Nepal faced shortages of various kinds of petroleum
products and food materials which severely affected Nepal's economy.
2017 – The Gaza electricity crisis is a result of the tensions between Hamas, which
rules the Gaza Strip, and the Palestinian Authority/Fatah, which rules the West Bank
over custom tax revenue, funding of the Gaza Strip, and political authority. Residents
receive electricity for a few hours a day on a rolling blackout schedule.[12][13][14]
[15]
2019 California energy crisis
2020s
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
2021 Texas power crisis
2021 United Kingdom natural gas supplier crisis and 2021 United Kingdom fuel
supply crisis
2021 global energy crisis. The record-high energy prices were driven by a global
surge in demand as the world quit the economic recession caused by COVID-19
pandemic, particularly due to strong energy demand in Asia.[16][17][18]
The Lebanese liquidity crisis lead to shortages of fuel for electricity plants, resulting
in the 2021 Lebanese blackout and public utilities being able to offer power for only a
few hours a day.[19]
Emerging oil shortage
Main articles: Oil depletion and Peak oil
"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
Main article: Mitigation of peak oil
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

Main articles: Energy economics and Renewable energy commercialization
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.

Global new investments in renewable energy, 2004–2010[26]

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

In 1980 Briggs & Stratton developed the first gasoline hybrid electric automobile;
also appearing are plug-in hybrids.
the growth of advanced biofuels.
innovations like the Dahon, a folding bicycle
modernized and electrifying passenger transport
Railway electrification systems and new engines such as the Ganz-Mavag
locomotive
variable compression ratio for vehicles
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.

See also: Green building and Zero-energy building

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]

The global energy crisis

Introduction
The world is in the middle of a global energy crisis of unprecedented depth and
complexity. Europe is at the centre of this crisis, but it is having major implications for
markets, policies and economies worldwide. As so often is the case, the poorest and
most vulnerable are likely to suffer most. The strains did not begin with Russia’s
invasion of Ukraine, but they have been sharply exacerbated by it. Extraordinarily
high prices are sparking a reappraisal of energy policies and priorities. The Europe-
Russia energy relationship lies in tatters, calling into question the viability of decades
of fossil fuel infrastructure and investment decisions built on this foundation. A
profound reorientation of international energy trade is underway, bringing new
market risks even as it addresses longstanding vulnerabilities.
Many of the contours of this new world are not yet fully defined, but there is no going
back to the way things were. And we know from past energy crises that the process
of adjustment is unlikely to be a smooth one. That adjustment will also be taking
place in the context of commitments made by governments to clean energy
transitions. A central theme of this World Energy Outlook 2022 is how the levers of
technological change and innovation, trade and investment and behavioural shifts
might drive a secure transition towards a net zero emissions energy system, while
minimising the potential risks and trade-offs between various policy objectives.

Key findings

 The recovery in global energy consumption that followed the pandemic-

induced drop in 2020 ended prematurely with Russia’s invasion of Ukraine in
early 2022, plunging global energy markets into turmoil, stoking inflationary
pressures and slowing economic growth. The strains on markets did not begin
with Russia’s invasion of Ukraine, but they have been sharply exacerbated by
it. This has led to volatility and steep spikes in energy prices, particularly for
natural gas in European markets, and the menace of further disruption to
supply looms large. Amid this turmoil, growth in renewables has held up well.
 The crisis has shattered energy relationships with Russia built on the
assumption of trust and secure supplies, and led to a reappraisal of energy
security needs in many countries. This is leading to a recasting of the energy
trade and investment landscape in profound ways. It has already prompted a
host of measures aimed at strengthening energy security, including support to
build domestic production capability in key sectors.
 One key question is whether today’s crisis will lead to acceleration in energy
transitions, or whether a combination of economic turmoil and short-term
policy choices will slow momentum. On the one hand, high fossil fuel prices
and record levels of emissions offer strong reasons to move away from
reliance on these fuels or to use them more efficiently. On the other, energy
security concerns may spur renewed investments in fossil fuel supply and
infrastructure. This Outlook considers the implications of different policy
choices.
 Today’s energy crisis shares some parallels with the 1970s oil price shocks,
but there are also important differences. The crises in the 1970s were
concentrated in oil markets and the global economy was much more
dependent on oil than it is today. However, the intensity of use of other fossil
fuels has not declined to the same extent; for natural gas it has risen in many
cases. The global nature of the current crisis, its spread across all fossil fuels
and the knock-on effects on electricity prices are all warning signs of broader
economic impacts.
 Governments made a host of commitments to sustainability in the run-up to
the COP26 meeting in Glasgow in 2021, and these remain the bedrock for
many energy strategies. In some cases, these ambitions have now been
reinforced by new measures seeking to reinforce long-term energy security
and accelerate energy transitions, including the US Inflation Reduction Act
and the REPowerEU Plan. The total amount of government spending
committed to clean energy transitions since the start of the pandemic amounts
to USD 1.1 trillion.
 Near-term borrowing costs are likely to rise as monetary policy tightens in
many countries. This could disadvantage some clean energy projects for
which financing costs play a major role in levelised costs. Nonetheless, clean
technologies remain the most cost-efficient option for new power generation in
many countries, even before taking account of the exceptionally high prices
seen in 2022 for coal and gas.
 This Outlook explores three scenarios – fully updated – that provide a
framework for thinking about the future of energy and exploring the
implications of various policy choices, investment trends and technology
dynamics. The scenarios, which should not be considered as IEA forecasts,
are:
1. Stated Policies Scenario, which looks not at what governments say they will
achieve, but at what they are actually doing to achieve the targets and
objectives they have set out, and assesses where this leads the energy
sector.
2. Announced Pledges Scenario, which examines where all current
announced energy and climate commitments – including net zero emissions
pledges as well as commitments in areas such as energy access – would take
the energy sector if implemented in full and on time.
3. Net Zero Emissions by 2050 Scenario, which maps out a way to achieve a
1.5 °C stabilisation in global average temperature and meet key energy-
related UN Sustainable Development Goals.
 Rising demand for energy services to 2040 is underpinned by economic
growth, which is lower to 2030 than in last year’s Outlook but which averages
2.8% per year through to 2050. The world’s population rises from 7.8 billion
people in 2021 to 9.7 billion in 2050, an increase of almost one-quarter. These
economic and demographic assumptions are kept constant across the various
scenarios, while energy and climate policies, technology costs and prices
vary.
 Cost pressures are being felt across the energy sector from persistent strains
on supply chains and from higher prices for critical minerals and essential
construction materials such as cement and steel. We expect recent rises in
clean technology costs to be temporary, and to recede in the face of the
forces of innovation and improvements in manufacturing and installation
processes. Current trends are, however, prompting governments to pay closer
 attention to the resilience and diversity of clean energy supply chains, which
cannot be taken for granted.
 Today’s exceptionally high fossil fuel prices are projected to ease as
economies slow and markets rebalance, although natural gas markets remain
tight for several years as Europe competes for available LNG cargoes to
compensate for curtailed Russian supply. The speed of adjustment and the
longer-term price trajectories differ by scenario, depending on the strength of
policy action to curb demand.