The global energy crisis is changing everything, making the transition to green energy complicated. Meanwhile, even before the pandemic, global energy production could not meet demand, while shale production in the U.S., the main source of additional oil supply over the past decade, has been in decline.
During the lockdown due to the pandemic, the demand for energy decreased drastically. In 2020, the investments of “black gold” producers declined by 30%, while leading shale companies went bankrupt. In the Permian basin in Texas the number of oil platforms halved compared to 2019. In addition, the curtailment of capital expenditure on oil and gas has accelerated thanks to the rise in investments based on ecological, social and corporate inter-government criteria.
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OPEC complains that a global campaign has been launched against the oil industry, banishing investors from “black gold”, Shell predicts a reduction in oil production of 1%-2% a year, while at the same time demand for oil is recovering faster than expected.
Traffic on U.S. roads has returned to 2019 levels, while demand will also be boosted by the reopening of air transport. However, soaring oil prices to nearly USD 200 a barrel could completely stem the recovery when central banks are powerless in the face of an energy crisis – a higher energy price will increase food costs.
Author Howard Odum has written that few realize that cheap clothing, cheap shelter and food are actually made from cheap energy. In his estimation, economic activity in general involves energy transport.
Someday renewable energy may replace the cheap supply from hydrocarbons, but it will not be easy. The global economy needs to be redesigned, supply chains shrunk, and many businesses entrenched in cheap energy will not survive.