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Falling down the rabbit hole The elusive reality of the global energy crisis according to Russian Kommersant

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Formally, in 2021, an energy crisis occurred in the world. On the other hand, no one has died from this crisis so far, which means that it seems to be not a crisis at all. The banal truth that everything depends on the point of view is supplemented with historical examples by the editor of the business department Yuri Barsukov.


Yuri Barsukov, editor of the business department of Kommersant


“Once Dostoevsky's nostril was clogged. He began to blow - the eardrum in the ear burst. Stopped it with a cork - it turned out to be great, the skull cracked. Tied with a string, looks - the mouth does not open. Then he woke up in disbelief; Rest in peace". This anecdote, attributed to Daniil Kharms, in my opinion, most accurately describes what was happening on the global energy market in 2021.

On the one hand, the industry is in a large-scale crisis: prices for thermal coal have more than tripled over the year , for gas in Asia - fivefold, in Europe - almost tenfold. This is only comparable to the 1973 crisis, when oil prices quadrupled. On the other hand, then, half a century ago, the crisis led to a real shortage of fuel in Western countries, many kilometers of queues at gas stations and a fall in the economy, and also became the beginning of a large-scale restructuring of the energy systems of Western states towards gas and nuclear energy. We are now seeing no impact on a comparable scale: with the exception of the power outages in China, which have already been addressed, the giant price rises have not led to truly critical energy shortages for end users - perhaps not yet.


Without understanding the consequences, we do not really understand the reasons either.

In 1973, everything was relatively clear: the OPEC countries made a political decision to reduce oil supplies to the states of the Western world, which reduced the amount of raw materials on the market by about 10%. In 2021, there was no obvious reason why gas supplies to the world market significantly decreased - namely, the shortage of gas pulled coal prices with it. Analysts attribute the resulting effect to a series of "unwanted coincidences": demand in Asia and Latin America rose sharply due to various kinds of weather factors, and LNG supply decreased due to repairs at individual plants.

Why were they taken out for such lengthy repairs? It seems that gas companies, accustomed to planning technological processes for years ahead, were paralyzed by the volatility that arose and were unable to move from the pandemic reality, in which gas costs less than $ 100 per thousand cubic meters, to the current $ 2,000. So Alice in Carroll's fairy tale could not find the right height for herself.

But the point is not only in the technical side, the number of wells or gas tankers. A crisis like this is always a paradigm crisis. In 2020, in Europe, one of the largest gas consumers, an accelerated movement towards decarbonization was announced , and it was not only the officials of the European Commission who supported and declared uncontested - it is enough to recall the BP annual forecast, which stated that the demand for oil in the world would never will no longer exceed the level of 2019 (now very few people believe in this). After a year of officials, energy CEOs, and political leaders competed over who will destroy their fossil fuels faster, the fuel has risen dramatically.

In the old reality, or, if you will, the reality of 1973, it would be necessary to immediately create incentives for the extraction and purchase of gas, oil and even coal in order to neutralize the deficit (as the Western countries did then).

In the new reality, the European Commission declares that it will fight the gas crisis with the accelerated development of renewable energy sources and the cancellation of long-term gas contracts. In one reality, a jump in gas prices is a long-term trend, in another it is a fluctuation. From the point of view of the traditional industry, gas has proved to be an irreplaceable part of the global energy system, which is also proved by the reaction of the markets to the reduction of supplies. In an alternative coordinate system, the rise in gas prices is another argument in favor of abandoning it.

In the old reality, coal prices of $ 150 per ton would have led to massive investments in core assets, and in three to four years a huge volume of raw materials would have entered the market. In the new reality, few people are ready to invest in assets that are believed to have an extremely short lifespan: after all, after 10-15 years there will be an energy transition and no one will need coal, and perhaps gas, too.

The old reality is based on expectations that the world will continue to be organized on existing principles, the new reality is based on the belief in drastic changes.

But in the physical world, unfortunately, only that reality can exist that is given to us in sensation. And if the energy crisis is real, then painful sensations will very soon await many consumers in Europe, and then in Asia. Even Russia, as an exporter of energy, has nothing to rejoice at: the rise in prices in 1973 contributed to the acceleration of inflation and the beginning of one of the largest economic crises of 1974-1975 in the West and in Japan

But something else is also possible: living in the expectation of trouble that has become familiar to us during a pandemic, we see trends where there is only an absurd heap of accidents, the theater of the absurd. Then the current rise in gas prices only means expectations of a future crisis, which may not happen. Prices will drop to as low as $ 400-500 per thousand cubic meters, and analysts will explain with a clever air that this was due to a combination of favorable factors - a warm winter, strong winds and the spontaneous launch of Nord Stream 2 due to a technical error. And we, waking up in bewilderment in the middle of the day on January 1, look around and, like Alice, say in confusion: "What a strange dream I had!"


Edited by Tomasz

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