Covid-19 caused chaos in the supply chain, but it is the government’s somewhat aggressive policies to reduce carbon emissions that have caused the current crisis.
While the world economy is struggling to grow again after the pandemic, an energy crisis suddenly appeared, spread and fanned the flame of inflation in Europe and China. It deals a blow to manufacturers, already in trouble after a chip crisis or disruption to global supply chains.
Europe is experiencing severe electricity and gas shortages while prices spike just before the peak winter demand period. The same goes for China, which faces a shortage of coal, its main source of electricity generation.
China has a serious coal shortage. Photo: Reuters.
Covid is clearly a big cause of this turmoil. However, the lack of vision and the “overhand” approach of governments to achieve carbon neutrality in the energy sector is the main reason.
European countries are frantically adding to their supplies of natural gas and coal at any cost, while previously cutting their budgets for the sector to focus entirely on green solutions like such recycled energy.
This irony comes on the eve of next month’s 26th United Nations Climate Change Conference, or COP26. Here, countries are expected to continue to double down on their commitment to abandon traditional fuels to soon reach their net zero emissions target.
A group of stakeholders and environmentalists has called for an accelerated “escape” from fossil fuels, ignoring the consequences of energy shortages.
In short, this situation has created a lot of noise and confusion, especially for general users – who used to dream of breathing fresh air and blue skies without sacrificing anything. what.
This energy crisis is a wake-up call for policymakers. A stable, reliable supply of coal, gas, oil, electricity and all other forms of energy is indispensable in the current strong post-Covid economic recovery.
With European natural gas inventories at record lows and off-market prices having surged 400 percent, power producers there have begun to resume contact with Russia to buy coal. However, since Europe began to move away from this so-called “dirty” fuel, Russia has redirected its exports to Asia. This means Europe must now look to the US for coal.
The crisis is spreading beyond the borders of Europe and China because the global energy markets are so interconnected. High LNG prices have prompted some power companies in Japan to switch to oil. Some power producers in India have also made similar moves when the price of imported gas is high and coal reserves are low.
Liquefied natural gas prices in Asia hit a record high at the end of September. Photo: AP.
Demand for oil is high, but the OPEC + alliance has just decided not to add more supply to the market compared to the previous agreement of 400,000 bpd. Oil prices immediately spiked to a three-year high, causing greater inflationary pressures.
In Europe, ministers are looking to agree on a common or coordinated response to secure supplies and ease pressure. In China, the central government plays an important role in containing the crisis. The country has instructed its giant state-owned energy companies to do everything necessary to procure sufficient supplies for all winter fuels.
However, according to Nikkei, the biggest mistake of governments today is to see the current predicament as temporary and continue to phase out traditional fuels in pursuit of ambitious environmental goals.
What is needed at this stage is to choose a more balanced approach: continue to exploit fossil fuels efficiently to reduce carbon emissions, while continuing to accelerate the development of energy solutions. clean.
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