Coal and oil continue domination: Unexpected demand creates global energy havoc

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Coal is no longer the king. Era of Oil is over. Our economies will be Carbon neutral.

These are some of the common claims that you might have heard or read in the mainstream media.

Many people truly believe that our economies are being decarbonized and getting rid of the dirty coal and evil oil. This is because they have been informed so.

However, the ground reality is strikingly different. Not only are fossil fuels still leading the energy mix, their prospects are stronger than ever.

The post-pandemic economic recovery has sent the fuel demand skyrocketing across the globe. Coal and Oil–the two most used energy resources are in high demand and their prices have touched record highs.

Unfortunately, many nations were caught off-guard, partly because of the unexpected pace of economic recovery and partly due to misleading projections about coal and oil demand.

Early October Cold Sends China into Further Trouble

China has been severely affected. More than a dozen provinces have already experienced regular blackouts during the past couple of months and it is predicted that the situation may not improve until the Spring of 2022.

Despite a ban on Australian coal, Beijing’s still allowed the stranded coal shipments at the ports to be used for its power plants and industries. But this had no major impact in helping the situation improve.

This week, early Winter cold arrived causing the mercury to plunge in many provinces. According to Reuters, “Forecasters predict average temperatures in some central and eastern regions could fall by as much as 16 degrees Celsius in the next 2-3 days.”

Predicting increased demand, the coal plants rushed to procure more coal, causing coal prices to rise further. “The most-active January Zhengzhou thermal coal futures hit a record high of 1,669.40 yuan ($259.42) per tonne early” on October 15, representing a total of 200% price increase in this year.

With more than half of the country’s provinces rationing power to its consumers, the power situation in China looks bleak. With a cold winter ahead, the situation could worsen.

There is already a drop of 12% in power consumption by industries. Top industries producing Steel, aluminum, cement, and chemicals are expected to face huge losses.

The only solution for economic recovery is coal. Beijing understands this and has asked its miners to produce more output. The fate of 1.3 billion people lies solely on the country’s access to affordable coal.

Oil Price Picks Up Pace following Positive Forecasts

Meanwhile, global oil prices have increased sharply this week, following positive outlook by the International Energy Agency, and renewed global demand.

Oil prices rose 1% on Thursday (14 October) after top oil producer Saudi Arabia dismissed calls for additional OPEC+ supply” and the International Energy Agency said “surging natural gas prices could boost demand for oil among power generators.”

Experts predict a “multi-week” gain and do not see the demand reducing significantly anytime soon. In fact, OPEC’s World Oil Outlook report has predicted that Oil will still be the most dominant energy source by 2045.

The rise in international oil price has impacted domestic fuel prices in many countries. There has been as much as 25% increase in fuel prices (petrol and diesel) in the past one year in India. As per OPEC, “India is expected to be the largest contributor to incremental demand (in oil), adding 6.5 mb/d between 2020 and 2045.”

Nigeria is set to face unprecedented rise in petrol and diesel prices as the international crude oil price begins to force the government to reduce its existing subsidies for fuel.

Consumers in the U.S. too are finding the rise in fuel prices to be challenging. Fortune reports that “since the start of 2021, prices at the pump have surged an average of 35% to $3.27 a gallon in September” and that an average family might have to shell out a further $600 every year now.

Contrary to Biden’s claim of reducing dependency on fossil fuels, the dependency has actually been increasing due to higher demand. Domestic U.S. oil production continues to rise and there is no end in sight. EIA predicts that the current U.S oil production of 11.3 million b/d will rise to an average of 11.7 million b/d in 2022.

  • "Vijay Jayaraj (M.Sc., Environmental Science, University of East Anglia, England), is an Environmental Researcher based in New Delhi, India. He served as a Graduate Research Assistant at the University of British Columbia, Canada and has worked in the fields of Conservation, Climate change and Energy."

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