Rising energy prices: no solution without turning back to fossil fuels - at least in the short-run

 

Wind energy by country


Although China made it clear recently that China was committed to meets its global obligations, when it comes to curtailing the greenhouse gases, the reality on the ground has forced some regional powers within the country to dealing with the acute power shortages, especially in the northeast regions.

The regional governments in question, most probably with the approval of the central government, have turned to Russia, Kazakhstan and Indonesia in order to fill the gap caused by the ban of commodity imports from Australia.

In addition, China is encouraging the local coal miners to increase the production too in the coming months in order to avoid a repeat of what certain region experienced in the harsh winter months.

China appears to be serious about the energy transition from fossil fuels to renewables in the long run; it has extended its ambition of turning its back on the former at a pragmatic pace to its investments overseas too, which, in turn has caused some countries in the Belt and Road initiative, the early enthusiasts, a bit jittery.

China sees an immediate economic advantage of turning to new sources for the supply of coal, especially for the colder months ahead: Russia and Kazakhstan, for instance, are geographically very close; Russia even shares a long, common border with China; that means the supply is cheaper and can be replenished at short notice; Russian coal exports to China have risen by over 9.8% this year.

In addition, Russia has also been providing the Chinese region with electricity since the beginning of October that has alleviated the power shortages in China to some extent; at political level, Russia and China, unlike with the neighbours of the latter, are having warm relations at present and this factor helps the both at economic level too – especially at a decisive time for both.

The growing energy crisis has sets its sight on China too: its electricity generation from wind power, as happened in the UK, has come down recently due to slow wind speeds that in turn put extra pressure on the grid; China got caught off-guard too, when it tried to reduce its reliance on coal, and was compelled to turning to gas and diesel to power up generators.

In 2020, China proved that it had the largest wind power capacity, followed by the European Union and the US: they were 281,993MW, 201,507MW and 117,744 MW respectively.

As for Europe, the rise in gas price has, meanwhile, set alarm bells ringing in the corridors of power, with Russia wielding the levers of muscle power to, alleviate it or exacerbate it.

Qatar, the world’s top LNG exporter, meanwhile has expressed its concern over both the current price of gas and its rate of increase.

Qatari position appeared to be the only sane voice in town to calm the markets: it says if this trend continues, it will be bad for both producers and consumers – in the long run; the Qataris have a valid point to make, if the price of gas goes up unabated, consumers suffer first and then that will be reflected upon producers as well – in the long run.

Who wants a fragile economic recovery to be stalled due to rising energy prices?

The US, meanwhile, has reversed its position on tapping its vas Strategic Petroleum Reserves. It now says that the US does not plan to do it at this stage. It, perhaps, may have come to the decision while exploring the crude oil inventory build in the US during the last week.

 

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