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October 28, 2021 Thursday 11:54:32 AM IST

Energy supply is at risk Globally!

 Dr Lurion De Mello from the Department of Applied Finance at Macquarie Business School, explains that Energy supply risk is soaring and demand for fuel is rising in need of power as the world hasn’t seen for almost 50 years. The current energy crisis happening in the world around shows that the transition to renewable energy will take longer time than expected. According to Dr Mello, the World leaders should think of investment in energy storage for solar and wind. 

The soaring crude oil and Liquified Natural Gas (LNG) prices, coal shortages and queues at the petrol pump in Britain, the world has not seen such a dislocation in energy markets since the oil shocks of the 1970s. Oil is at a three-year high due to tight supplies, European and Asian gas prices are at an all-time high, and coal is soaring driven by energy shortages across China, India and Germany. This demand is being driven mostly by recovering economies and anticipated extreme weather conditions in Europe and north-east Asia. China is giving priority to stockpiling domestic coal and gas reserves at all costs, and a further complication is stemming from Russia’s reluctance to supply gas into Western Europe. Eastern Australia is already dealing with a challenging gas-pricing model, and there is growing speculation that soaring natural gas and LNG prices may also hurt domestic energy retailers in the future. In Britain, a lack of truck drivers has led to a range of problems for retailers, resulting in panic-buying as motorists feared a petrol shortage. After Brexit, many European drivers returned to their home countries and never returned. OPEC and a Russia-led group of oil producers agreed to raise oil production in measured steps, but decided against opening the spigots more widely. The current situation also provides additional export opportunities to countries like Pakistan, India and Vietnam in the Indo-Pacific that are investing heavily in their gas infrastructure and are eager to receive LNG imports. The Australian coal industry took a big hit in November 2020 with China banning shipments, but demand from markets in India and Japan and South Korea has provided a windfall. With European LNG prices rising, coal usage has increased in north-west Europe. If countries like Germany and Poland decide to replenish their stockpile of coal in 2022, Australia could have further opportunities to sell coal into Europe. In Asia, there isn’t enough coal to meet expected demand.

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