Fatih Birol, the chief of the International Energy Agency, had some dark news about the global energy crisis that is threatening the world economy. He said the “world has never witnessed such a major energy crisis,” and he is predicting that it is likely to get worse in the coming months before it gets any better.
Birol spoke in Sydney at a global energy forum and said, “The world has never witnessed such a major energy crisis in terms of its depth and its complexity. We might not have seen the worst of it yet — this is affecting the entire world.”
Of course, one of the major reasons for the crisis causing soaring energy prices around the globe is Russia’s invasion of Ukraine. It caused a string of Western sanctions on its oil and gas supplies. This has led to significant supply constraints. This was all intensified by the demand that was built up by the pandemic over 2020 and 2021.
In the United States, the cost of energy has led to high levels of inflation. It has ransacked every part of the economy and has led to tragic pain for Americans at the gas pump.
The real downside is that Russia has been racking up unprecedented profits because of its gas sales to Asia. Countries like India and China are racing to Russia for its cheaper energy supplies. Russia will most like earn $285 billion this year from its oil and gas sales.
Birol had more bad news focused on the winter that is just a few months away. He said the region will see more challenges as Russia messed with energy markets even more just recently.
Energy Crisis to Worsen in Europe in Winter Months
Putin cut off the natural gas supply to several places in Europe. He is continuing to do work on the Nord Stream 1 pipeline. The problem is that some are worrying that the shutdown could be permanent. “This winter in Europe will be very, very difficult. This is a major concern, and this may have serious implications for the global economy,” Birol said.
The uncertainty has caused European countries like Germany and Italy to move to use coal as an emergency plan. They are also considering rationing just in case Russia does shut down the gas supply to the regions.
Birol had more tough news for the United States. He said that fuel shortages in America this summer could rival the 1970s oil crisis. But it will be even worse. “Back then it was just about oil. Now we have an oil crisis, a gas crisis and an electricity crisis simultaneously,” he said.
Birol declared that the proposal from the G7 leaders to impose a price cap on Russian oil should include refined products as well.
The Group of Seven nations is thinking about imposing a price cap on Russian oil so that they can keep oil flowing and also lessen the effects of inflation.
“My hope is that the proposal, which is important to minimize the effect on the economies around the world, gets buy-in from several countries,” Birol told Reuters in an interview on the sidelines of the Sydney Energy Forum.
“And if it is pursued, it is not only focused on crude oil, as refined products are also an important challenge for the economies and will be more of a challenge in the next months to come,” he said.
Birol said the IEA was developing a plan to coordinate critical mineral supplies throughout its membership and associate member countries. This would be in case of a supply disruption, similar to the emergency petroleum stockpiles that have been used recently to beef up the global oil supply.
Birol believes that critical minerals security will be an important strategy for energy security in the future.
There’s some light at the end of the energy tunnel, but it is far away.