Green Energy is the buzzword these days. Not because it sounds cool, but because it is a necessity now. We have obliterated the planet to an extent where we can see a rise in the average global temperature by 2040. The figures are alarming, and the nations are cutting down on emissions astronomically. However, there is an idiosyncratic problem evolving in Europe. Let’s find out!
Europe is known for its freezing winters as the temperatures drop below 10 degrees Celsius in most parts of the continent. Homes sooner or later will be in dire of Liquified Natural Gas (LNG) to heat their homes. However, Europe is seeing a shortage of LNG, and the worst part? The deficit won’t come to an end anytime soon. The supply dwindling coupled with an increase in demand has skyrocketed the energy prices in Europe.
How much have the prices skyrocketed, you ask?
As high as 500% since the last year!!! According to a report by Business Standard.
But what has led to such exacerbating conditions all over the continent? As an article by Bloomberg reports,
Europe has had to contend with:
1. Lower volumes of gas piped in from Russia
2. Less gas exported from Norway, Trinidad and Nigeria
3. Less gas stored because the previous winter was colder than average
4. Higher demand for gas globally as economies emerge from pandemic lockdowns
5. Very low wind speeds
6. Increase in imports to Asia and South America.
When I saw the statistics pertaining to exports and imports of LNG, I was spooked. As one report from CSIS quotes,
Exports from Norway have fallen 93 percent so far this year, from Trinidad 37 percent, and from Nigeria 19 percent. These countries accounted for 10 percent of global supplies in 2020, so their shortfall is material. However, these are countries that export LNG to Europe.
LNG imports into China have grown by 22 percent through August. 80 percent of the new LNG produced in 2021 has gone to China, forcing the rest of the world to apportion the remainder. Imports into Asia have risen 11 percent and into the Americas 59 percent. Europe is the market of last resort in LNG.
Exports from Russia have been lower than expected, largely because of the need to meet demand and refill storage at home. The amount of gas stored in European facilities is lower than earlier years because of colder winters earlier. Russia is by far the larget exporter of LNG in Europe.
How will the world supply chain face repercussions because of the gas shortage in Europe?
A lot will be dependent on how winter strikes Europe. If the winter is actually cold, countries will not have enough gas for heating in parts of Europe. This will have a cascading effect on the world economy. With lesser supplies and increasing demands, factories having energy-intensive work will be forced to shut down. In China, industrial users, including makers of ceramics, glass, and cement, may respond by raising prices; households in Brazil will face expensive power bills. Economies that can’t afford the fuel — such as Pakistan or Bangladesh — could grind to a halt. The fuel bills have already started to increase, and invoices in Germany have risen by 50%.
Bottom Line?
A lot has been brewing worldwide regarding the energy crisis, and it seems that the situation will only worsen over the months. The supply chain for energy will be (actually is) disrupted all over the world. Countries in Europe will be meeting in October to see how much gas is coming from Russia. Diplomatic talks with Russia and asking them to export more seems the only way to avoid a global disaster.
Meanwhile, other countries be like 👇
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Eye-opening facts about the Global Energy Crisis
- The complexity of energy is beyond imagination since everything is interconnected. The United Kingdom is facing a shortage of drivers due to which fuel prices have reached new highs. A shortage of drivers means that fuel is not reaching the destinations. 😯
- Brazil has warned the world about the energy crisis due to its record drought, which means a decrease in hydroelectric power supply worldwide. Water reserves at hydropower plants are already at their lowest level in 91 years of record. 😣
- Crude prices have risen for the 5th straight day because of the surge in demand. Crude prices rose for the fifth consecutive day on Monday, with Brent touching the highest levels since October 2018, nearing $80 per barrel, over supply concerns, as global demand picks up following the easing of covid-led curbs. This consequence is sought to relate to the energy crisis, which has also led to the soaring coal prices. 😥
- Dutch Minister Stef Blok has indicated that he is considering the potential reopening of the Groningen field. The reopening of the field, even in the case of an emergency or an energy crisis, is politically controversial. The field was anticipated to remain completely shut till 2023, indicating how severe the trouble is. 😵
Global News from all around the world
- Swiggy has strengthened its position in the grocery market as Zomato steps out. 😍
- Ford is investing USD 11.4 Billion in electric motors and batteries. 🤑
- Dow slumps over 500 points, and NASDAQ plunges 2.7% amid the surging bond yields. 😲
- American Private Equity Major KKR is selling a 6.5% stake in Max Healthcare Institute worth USD 300 Million. 😳
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