Our current energy crisis is pretty bad. U.S. oil prices have jumped 36% year to date amid Russia's war on Ukraine, even after a 16% slide since June 8.
Coal and natural gas prices have surged too. This reminds many experts of the 1970s, when supply disruption from the Mideast twice sparked global energy crises.
So are things as bad now as in the 1970s? Legendary energy scholar Daniel Yergin, now vice chairman of S&P Global, recently weighed in with some sobering thoughts.
“Yes, this energy crisis is as serious,” he wrotes on Project Syndicate. “In fact, today’s crisis is potentially worse. In the 1970s, only oil was involved, whereas this crisis encompasses natural gas, coal, and even the nuclear-fuel cycle.”
Keep in mind that “in addition to stoking inflation, today’s crisis is transforming a previously global market into one that is fragmented and more vulnerable to disruption, crimping economic growth,” Yergin said.
Five Negative Signs
“Looking ahead, five factors could make today’s energy crisis even worse,” he said. “First, Putin has opened a second front in the [Ukraine] conflict by cutting back on the contracted volumes of natural gas that Russia supplies to Europe.
“Second, a new or revived nuclear deal with Iran is unlikely,” Yergin said. “Thus, sanctions on the country will not be lifted. And that means Iranian oil will not be flowing into world markets anytime soon.
“Third, although Saudi Arabia may step up its oil production to help stabilize oil markets in connection with President Joe Biden’s [recent] visit, no gusher is likely to follow….
“Fourth, China’s demand for oil has been significantly reduced by its zero-covid lockdowns, which have sharply curtailed economic activity,” Yergin said. “But if it lifts many restrictions, a big increase in oil consumption and demand will follow.”
Finally, “however tight the market for crude oil, there is even more tightness in the refining sector that produces the gasoline, diesel, and jet fuel that people actually use,” he said. That means higher gas prices and airfares.
It’s Not Just Yergin
Others are pessimistic too. “The world has never witnessed such a major energy crisis in terms of its depth and its complexity,” said Fatih Birol, head of the International Energy Agency, The New York Times reported.
Meanwhile, the energy crisis is putting a dent into countries’ efforts to shift to clean energy from fossil fuels. That’s because supply shortages have necessitated heavy usage of the dirtier energy.
“We continue to feed our fossil fuel addiction,” United Nations Secretary General, Antonio Guterres said at a recent climate change conference, according to The Times.
