By: Ron Ye
India and China, mainly reliant on coal for electricity, are suffering from a coal shortage. The price of natural gas in Europe is skyrocketing. Much of Lebanon is suffering from power outages. These pose some questions. Why are so many regions suffering from energy problems? Is there a global energy crisis? Why has the US seemingly not been affected by it? To answer these questions, we must analyze each of these regions.
70% of India’s electricity comes from coal. What is concerning about this fact is that India has nearly depleted its coal reserves. A cause is that India’s energy demands jumped after their COVID lockdown ended. Although India’s domestic coal production has been rising in recent years, the annual monsoon disturbs the transportation and mining of domestic coal. The effect of the monsoon is usually negated by importing more coal. However, the global coal price has risen because of demand from other countries suffering from energy crises.
In the past, China has struggled to meet energy demands. Now, China is actively suffering from power outages. About 57% of China’s electricity comes from coal. This dependence has led to power outages because of several factors. First is China’s goal of becoming carbon-neutral by 2060. To do so, the Chinese government ensured that coal production declined even when most of the country still used coal. In addition, the recent political friction between China and Australia over the origins of COVID has caused China to place an embargo on cheap Australian coal. Despite the increase in the cost of coal, the Chinese government is preventing electricity prices from rising relative to it. Chinese power plants are now unwilling to operate because they will not be turning a profit. To further exacerbate the issue is that coal demand increased because of recovery from COVID. Chinese factories have been opening up in response to the revived global demand for Chinese products.
Natural gas is vital in Europe for heating homes during winter. Natural gas prices have been surging for a multitude of reasons. Europe’s domestic production of natural gas has decreased because sources are running dry. In turn, Europe has become dependent on imports of natural gas. In 2019, Europe had to import 90% of its natural gas. The price of natural gas has also risen because of the growing global demand caused by the reopening of economies from COVID. Moreover, EU lawmakers are accusing Russia of limiting Russian natural gas exports to Europe to convince the EU to allow the construction of Nord Stream 2, a gas pipeline that would allow Russia to influence the European energy market. Europe’s goal of carbon neutrality is also causing problems. This year, Europe’s renewable sources of energy have been unable to replace natural gas. The lack of wind during the summer has greatly affected energy production from wind turbines. Worsening this issue was the unusually cold winter that drained last year’s supply of natural gas.
Lebanon has been suffering from a severe economic crisis for the past two years. The Lebanese currency has lost 90% of its value, and the UN estimates that about 74% of Lebanese live in poverty. This economic crisis has led to the recent power outages affecting Lebanon. Lebanon’s Central Bank subsidizes imports of fuel which is vital for its electricity. Because of the economic crisis, Lebanon has run out of foreign currency to pay foreign energy suppliers for fuel.
If there is a global energy crisis, what about the US?
There is something interesting about the global energy crisis we are currently facing. Although it is clear that COVID has a hand in the current energy crisis, each region also has a unique cocktail of factors that actually created these energy crises. COVID, by itself, is not enough to start an energy crisis. The US is an example. Like other regions, energy demands have increased in the US because of reopening from COVID. However, it has not become a crisis because the US lacked the unique factors that Europe, China, India, and Lebanon had. We are not seeing power outages like those in China and feared in India because the US is not over-reliant on one source. According to the US Energy Information Administration, US electricity in 2020 comes from 40% natural gas, 20% coal, 20% nuclear energy, and 20% renewables. Our natural resources have not dried up like in Europe. And the US economy, unlike Lebanon, is doing relatively well even with COVID. Of course, this does not mean that the US is immune to the current situation. These regional crises are creating a global energy crisis by causing energy prices to rise. As global energy prices continue to balloon, it would not be surprising if the US and the rest of the world begin to face problems.