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