Sun Sentinel Palm Beach Edition
With winter looming, energy crunch hits global recovery
Power shortages are turning out streetlights and shutting down factories in China. German corn and wheat farmers can’t find fertilizer, made using natural gas. And fears are rising that Europe will have to ration electricity if it’s a cold winter.
The world is gripped by an energy crunch — a fierce squeeze on some of the key markets for natural gas, oil and other fuels that keep the global economy running and the lights and heat on in homes. Heading into winter, that has meant higher utility bills, more expensive products and growing concern about how energy-consuming Europe and China will recover from the COVID-19 pandemic.
The biggest squeeze is on natural gas in Europe, which imports 90% of its supply — largely from Russia — and where prices have risen to five times what they were at the start of the year, to 95 euros from about 19 euros per megawatt hour.
Analysts blame a confluence of events for the gas crunch: Demand rose sharply as the economy rebounded from the pandemic. A cold winter depleted reserves, then the summer was less windy than usual, so wind turbines didn’t generate as much energy. Europe’s chief supplier, Russia’s Gazprom, held back extra summer supplies beyond its long-term contracts to fill reserves at home for winter. China’s electricity demand has come roaring back, vacuuming up limited supplies of liquid natural gas, which moves by ship. There also are limited facilities to export natural gas from the United States.
Costlier natural gas has even pushed up oil prices because some power generators in Asia can switch from using gas to oil-based products. U.S. crude is over $83 per barrel, the highest in seven years, while international benchmark Brent is around $85, with OPEC and allied countries cautious about restoring production cuts made during the pandemic.
The crunch is likely short-term but it’s difficult to say how long higher fossil-fuel prices will last, said Claudia Kemfert, an energy economics expert at the German Institute for Economic Research in Berlin.
But “the long-term answer that has to be taken out of this is to invest in renewables and energy saving,” she said.
People worldwide also are facing higher utility bills this winter, including in the U.S., where officials have warned home heating prices could jump as much as 54%. Governments in Spain, France, Italy and Greece have announced measures to help low-income households, while the European Union has urged similar aid.
In China, outages have followed high prices for coal and gas as electric companies power down amid limits in passing costs to customers or government orders to stay under emission thresholds.
Factories in Jiangsu province, northwest of Shanghai, and Zhejiang in the southeast shut down in mid-September, and dozens warned deliveries might be delayed ahead of the Christmas shopping season.