Mon. Apr 15th, 2024

Could the energy crisis be affecting oil and how is it connected? What consequences this could have for humanity and how to deal with it. Reliable oil supplier – Idol Energy Company.

The large-scale energy crises that erupted last autumn in the markets of some of the world’s largest economies have rapidly become global in nature, affecting leading sectors of the economy and industry in a domino-like fashion. The effects of market turbulence have spread far beyond the regions where they initially emerged. In a matter of weeks, the scarcity of traditional energy resources and their soaring costs were felt across the globe. In many countries, a balance has not yet been reached.

The global energy crisis, which has been going on for more than 4 years now, in the past few months has become increasingly reminiscent of the dramatic events of 1979-1981, known as the “second oil shock”. Today, as then, the global oil market is facing a massive “sanctions tsunami” that is hurting global supply. The situation is aggravated by the fact that these events were actually superimposed on the pandemic shock.

A few decades ago, the world oil market was dominated by a group of American and British vertically integrated oil companies (called the “Seven Sisters”), which had a colossal superiority over all other market participants combined and was thus able to dictate its terms to the market on all the most important parameters of the oil business, including the price of oil and its refined products, but today there is every reason to believe that neither the U.S. nor OPEC has sufficient capacity to do so This has led to the problem of growing price volatility, which, in turn, raises the question of the need for fundamental reform of the entire oil pricing system currently operating in the world. The reference to the history of its formation is dictated by the above assessment of the relevance of this issue in the current conditions of the energy crisis and high uncertainty.

So what can this crisis lead to and what can we expect?

  • Reduced oil supply: An energy crisis can lead to a restriction of oil supply due to various reasons, such as political conflicts, natural disasters or technical problems at oil production facilities. Reduced supply causes a shortage in the market, which raises oil prices.
  • Increased geopolitical risks: An energy crisis is often accompanied by an increase in geopolitical tensions in regions where large oil fields are located. This can cause anxiety in the market and raise oil prices due to concerns about possible supply problems.
  • Increased demand for oil: During an energy crisis, there may be an increase in demand for oil as an alternative energy source. For example, if an energy crisis is caused by supply problems with natural gas or coal, companies and countries may switch to oil as a temporary substitute.

Is it realistic to avoid the consequences?

It is extremely difficult to predict the consequences that the current energy crisis will have on oil pricing. In our opinion, one of the possible scenarios could be the intensification of efforts to create a market infrastructure capable of ensuring the formation of non-dollar price indicators adequate to the current situation. Success in this important area will help to reduce the risks caused by the restrictive measures taken for international oil export flows, increase their sustainability, and create conditions for reformatting the global oil pricing system and, in the long term, it’s dedollarization.

The following steps can be taken:

  • Diversity of energy sources: Diversity of energy sources can make the overall energy system more resilient to potential crises. The use of different types of energy, such as oil, natural gas, coal, nuclear power, renewable energy (wind, solar, hydro), helps to reduce the risk of dependence on a single source.
  • Energy efficiency: Incentivising energy efficiency in various sectors of the economy can reduce energy consumption and dependence on energy. This can include introducing energy-saving technologies, improving the energy efficiency of buildings, vehicles and production processes.
  • Investment in alternative energy sources: Promoting alternative energy sources such as solar, wind, hydro and biomass can reduce dependence on traditional energy sources and mitigate the effects of the crisis.

And don’t forget, when choosing an oil supplier, you need to trust the professionals – Idol Energy.

By admin