Global energy crisis: no magic bullet in the offing

 

The price of crude oil reached record high on Monday as the worries over the supply of fuel for the winter months in Europe and America are growing by the day.

At present, the Western policymakers do not know what to do in order to alleviate the crisis: gas has been in short supply for weeks and that in turn has increased the demand for oil and coal.

Coal mining firms did not increase the investments in the past few years as the industry, more often than not, has been singled out for causing the biggest environment damage; in these circumstances, they cannot increase production at short notice.

It may not be fashionable yet; the demand for coal, however, is on the increase, in Europe, China and of course, elsewhere.

The power shortages in China, meanwhile, are on decline as the authorities were ready to finance the imports, if necessary. It, however, has taken its toll on multiple production lines that could potentially lead to supply chain disruptions.  

The Western leaders, meanwhile, are under pressure to get a grip of the rising fuel prices; it has already triggered off a damaging chain reaction as far as consumers are concerned.

The leaders of the West have been forced to walk a tight rope by the developments that hit the Western governments like a bolt from the blue: on one hand, they have to control the inflationary pressure that could derail the fragile economic recovery; on the other hand, their much-trumpeted green credentials will be under sever scrutiny in the event of they make a contradictory political move.

In the United Kingdom, meanwhile, the opposition Labour Party wants to use public funds to ease the burden on ordinary consumers, hit by rising fuel costs – as a last resort.

Although increased demand is attributed to the sudden spike energy prices, the US crude inventory data during the past two weeks showed the inverse; the inventories, in fact, substantially grew.

In this context, analysts are watching the latest crude oil inventory data in the next two week in order to gauge the demand and estimate it for the next few weeks.