Global energy risks continue to intensify

With the gradual recovery of global economic activity in 2021, the demand for energy in the global market has also rebounded
significantly.
With the arrival of the cold winter in the northern hemisphere, under the influence of a series of factors such as the new crown pneumonia epidemic, the flood of liquidity and climate change, some energy sources, including crude oil, coal and natural gas, have been undersupplied, resulting in soaring energy prices, of which natural gas has become the "bellwether"
of rising energy prices.

At the same time, driven by the sharp rise in the price of fossil fuels such as natural gas, electricity prices in the United States and Europe have also soared
.
The rapid rise in electricity prices has further affected many industries such as food, fertilizers, transportation services and industrial metal smelting, pushing up their production and operation costs and bringing a series of chain reactions
.

The growth of market demand for traditional fossil fuels such as natural gas and crude oil also reflects to a certain extent the shortcomings and deficiencies
of the current clean energy such as wind energy and solar energy in production, transportation and power generation.
In the process of global energy structure transformation, the development prospects of clean energy are expected to face more challenges
.

Severe cold weather exacerbates the energy crisis

With the arrival of severe cold weather in the northern hemisphere, the heating demand in the United States and countries and regions such as Europe has risen
sharply.
As minimum temperatures in many European countries have dropped below zero degrees Celsius, further increases in heating demand have exacerbated already overloaded power networks
.
At the same time, the problem of insufficient natural gas supply in Europe has become more and more prominent, energy sources such as wind energy and nuclear energy are difficult to make up for the power generation gap, and the electricity prices of many European countries have "exploded", and an energy crisis is sweeping across the continent
.

In response to the reasons behind the outbreak of the energy crisis this winter, Chen Weidong, president of the Bank of China Research Institute, said in an interview with the Financial Times that there are three main reasons for the current round of
energy crisis.
First, the imbalance between energy supply and demand is the direct cause
of this round of energy crisis.
Since 2021, economies have gradually recovered from the impact of the epidemic, and energy demand has increased rapidly, but the recovery of production capacity in major energy supply countries has been far less than demand
.
Affected by this, the natural gas, oil and coal inventories in the world's major energy consumption areas are much lower than the same period in previous years, and the energy supply and demand relationship is unbalanced
.

Second, under the background of global energy transformation, the traditional energy production capacity is insufficient, while the output of new energy power is unstable, which triggers the power crisis
.
Since 2021, the pace of promoting green transformation around the world has accelerated significantly, fossil energy investment has gradually decreased, and the supply of traditional energy sources such as oil, gas and coal has been tight
as a whole.
According to statistics, in 2021, the total global oil and gas investment fell by about 26%
compared with the pre-epidemic period.
While global clean energy has grown by leaps and bounds, the problem of unstable power output has not yet been solved
.
Coupled with the extreme weather impact of this winter, the vulnerability of the high proportion of clean energy power systems has been highlighted, and energy prices and electricity prices have risen in many countries, and power crises have occurred
frequently.

Third, the easing of global liquidity has pushed up energy prices and exacerbated the energy crisis
.
In order to reduce the impact of the epidemic on the economy, major economies such as Europe and the United States have launched large-scale unconventional fiscal and monetary policies to stimulate economic recovery, exacerbating the flood of global liquidity, triggering a rise in commodity prices, including energy, and further exacerbating the energy crisis
.

Opportunities and challenges for the development of clean energy coexist

In fact, in addition to natural gas, the price of crude oil, an important commodity, has also risen
this year.
At present, the international crude oil price has long been out of the trough of 2020 and is in the midst of
a shock upward.
Increased demand for crude oil brought about by the economic recovery, the impact of extreme weather on important oil-producing areas, and the cautious action of OPEC+, composed of the Organization of the Petroleum Exporting Countries (OPEC) and allies, in terms of crude oil production increases, have jointly driven up
crude oil prices.

Although high crude oil and natural gas prices have increased the current energy use costs in major countries such as the United States and Europe, the demand for crude oil, natural gas and traditional fossil fuels such as coal in these countries is still increasing
in the face of insufficient power supply.
However, it is worth noting that this does not mean that clean energy has lost its momentum for
development.
Judging from the current situation, the transition of the global energy consumption structure to cleaner energy is still the trend of the times
.
But at the same time, it is also necessary to face up to the current problems and challenges
in the production and use of clean energy.

"For many years, developed countries represented by Europe have been seeking a low-carbon energy transformation plan, gradually shutting down nuclear power plants and thermal power plants, while increasing the proportion of
clean energy use.
" However, the epidemic has disrupted the pace of global economic development, and there has been a serious imbalance
between energy supply and demand in the process of economic recovery.
Coupled with the frequent occurrence of extreme weather in the hot summer and winter this year, the demand for electricity has risen sharply, and the negative impact of the energy crisis has become more prominent
.
But the imbalance between energy supply and demand is only a temporary mismatch between supply and demand
.
In contrast, in the process of energy transformation, the development of clean energy is greatly affected by natural factors, there is instability in power output, and the cost of energy storage and peak regulation is high, and these technical problems are more worthy of attention
.
Chen Weidong analyzed
.

The International Energy Agency (IEA) noted in its latest renewable energy market report released in December that despite rising costs of key materials used to make solar panels and wind turbines, new renewable energy capacity is expected to rise to 290 gigawatts (GW) in 2021, surpassing last year's record high
.
And it is expected that by 2026, global renewable electricity production capacity is expected to rise by more than 60% from 2020 to more than 4800 GW – equivalent to the current global fossil fuel and nuclear power generation capacity
.

In addition, the current high oil prices also provide opportunities
for the development of clean energy to a certain extent.
Chen Weidong believes that the long-term high oil prices have prompted countries to actively look for alternative energy sources, thereby stimulating the development of clean energy industries
.
Driven by corporate demand and guided by government policies, clean energy may usher in a good opportunity for
development.

Specifically, on the one hand, the rise in oil prices will increase the cost pressure of enterprises in industries sensitive to oil price changes such as transportation and chemical industry, making the willingness of relevant enterprises to find alternative energy sources stronger, and the proportion of clean energy used as an alternative will increase; On the other hand, international oil price fluctuations are prone to affect the industrial and macroeconomic development of
various countries through the transmission effect.
To avoid the risks posed by fluctuating oil prices, governments have the incentive to step up their support for clean energy development at the policy, financial and technical levels
.

"Green investment, mainly based on the development of clean energy and its supporting infrastructure, is still an important development direction and will have a pulling effect
on the economic recovery of various countries.
" The problems exposed in the development of clean energy will prompt countries to further increase investment and cooperation in clean energy technology research and development, use technological progress to make up for the shortcomings of clean energy, improve the efficiency of clean energy use, and ensure the safe and stable operation
of energy power systems.
Chen Weidong said
.

High energy prices increase inflation risks

From the current situation, the rapid rise in commodity prices such as crude oil and natural gas under the energy crisis has pushed up the already high level of global inflation to some extent, which in turn has brought uncertainty
to the prospects for global economic recovery.
The latest data released by the U.
S.
Department of Commerce shows that the U.
S.
Personal Consumer Expenditure Price Index (PCE) rose 5.
7%
year-on-year in November.
Also affected by soaring energy costs, the Eurozone Harmonized Consumer Price Index (HICP) rose 4.
9% y-o-y in November to a record high
.

In Chen Weidong's view, the continued high energy prices will delay the global economic recovery process
.
From the supply side, energy is an important material basis for economic and social development, and its price increase will first lead to an increase in the cost of power generation and an increase in electricity prices, which will then push up the production cost
of the manufacturing industry as a whole.
In addition, rising energy prices will also lead to an increase in the production cost of pesticides, fertilizers, cleaning agents and other products using crude oil as raw materials, as well as the cost of logistics and transportation
.
Rising production costs squeeze corporate profits, leading to reduced industrial activity and a slowdown in
economic recovery.

From the demand side, rising energy prices will push up prices and have an impact on
final consumption.
Affected by the epidemic, the economic recession of various countries, the rise in unemployment, the decline in residents' income, and the "helicopter money" type of fiscal stimulus in some countries is difficult to maintain, and the probability of sustained recovery of global household consumption is not large
.
The rise in production costs caused by rising energy prices will be passed on to final consumer goods, which will be paid for by consumers, which will make the already underpowered consumer demand worse
.

Chen Weidong believes that considering the uncertainty of epidemic control and the fierce game of great powers, the global industrial chain and supply chain are still facing the risk of breaking the chain, and the global production capacity will still be constrained
.
Persistently high energy prices, high production costs, and the risk of continued upward global inflationary pressures will have a lasting negative impact on
the steady recovery of the economy.