By Eric Vandenbroeck and co-workers

This winter, Europe is living through an energy crisis, with soaring prices for natural gas and electricity. It started when storage levels of gas fell well below average last year.

Natural gas is trading at about five times the price of a year ago. Although prices are now about half of the peak reached late last year, they are roughly seven times higher than levels in the United States. High gas prices raise electricity costs, threaten significant increases in consumers’ bills, and have pushed some energy-hungry factories like fertilizer plants and metal smelters into temporary shutdowns.

Underneath countries by natural gas proven reserves, based on data from CIA World Factbook. Iran has the world’s second-largest natural gas reserves after Russia:

As Russia plays hardball with Europe’s gas supply, the continent is staring down a worrisome energy future—and it’s not alone. For months, sky-high natural gas and oil prices have been wreaking havoc around the world, and experts warn that there is no end in sight as long as the war in Ukraine barrels on.

From Ecuador to South Africa, fuel shortages and blackouts have plunged import-dependent countries into economic turmoil, leaving desperate governments scrambling for workaround solutions. In Sri Lanka, which was already buckling under mounting crises, acute shortages and dayslong lines have forced authorities to issue work-from-home orders. Pakistan has resorted to shortening its work week to relieve pressure from long power cuts, while demonstrations over surging prices have rocked Panama.

We are experiencing the first global energy crisis, and the ripple effects are being seen globally, and we don’t think we have seen the worst of it yet.

Markets were already tight before Russia invaded Ukraine, resulting in the pandemic, supply chain slowdowns, and climate shocks. That was compounded by curtailed Russian gas exports, which forced Europe to turn elsewhere for its supplies and further drove up prices in the global marketplace. These challenges have only deepened as climate change-fueled extreme heat adds more fuel to the fire.

The last time the world experienced a disastrous energy crunch—albeit only for oil—was the 1970s, and OPEC had imposed an embargo that sent shockwaves through the oil industry. That crisis birthed the International Energy Agency (IEA) and pushed industrialized nations to develop strategic reserves in preparation for future supply disruptions, said Antoine Halff, an expert at Columbia University’s Center on Global Energy Policy. But many emerging market economies and debt-laden countries don’t have this same cushion, leaving them especially exposed to any disturbances. 

Today, we have a whole new cast of smaller countries that have been developing rapidly and using more energy—and that’s a great sign that reflects their economic development, but that also made them much more vulnerable to disruption risks. They’re not part of that safety net of the IEA.

Take Pakistan, which has been struggling to cope with power cuts, or Ecuador, where deadly protests over surging fuel prices and costs brought the country to a near standstill in June. Recently, both Ghana and Cameroon have been gripped by protests over fuel prices and shortages. So have Argentina and Peru, where surging energy costs have sparked strikes and demonstrations. 

The world's poorest countries are already struggling economically, are in weak fiscal positions, and are just struggling to afford energy. We think the worse risk of rolling blackouts and trouble keeping the lights on and the electricity going in parts of the world that are lower income and don’t have stable electricity grids, to begin with.

Some countries are already in the dark. South Africa, which is certainly no stranger to load-shedding, has been plagued by rolling blackouts as it grapples with one of its worst-ever energy crises. So has Cuba, which was already suffering from widespread power outages. 

 

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