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Will the energy transition end decades of energy shocks?
6/12/2023
6 min read
Feature
After decades of oil and gas price shocks affecting geopolitics, businesses and everyday consumers, energy writer Selwyn Parker asks whether distributed energy systems served by renewable sources can significantly reduce energy cost disruption in the search for long-term stability.
We have never seen a better demonstration of ‘exogenous shock’, one of the favourite terms of energy economists, than we do now with a major conflict in progress in the Middle East. The term essentially refers to the impact of ‘outside influences’ on the supply of oil and gas that dramatically affect prices. Indeed, quite apart from war, there are a lot of these influences.
The outbreak of hostilities between Hamas and Israel had immediate and predictable results, with the price of a barrel of Brent crude jumping by $4, disruption of offshore drilling activities in the Southern Mediterranean, delayed and hijacked tanker deliveries, and widely forecast effects on the price of LNG.
And that’s just the latest exogenous shock. Russia’s invasion of Ukraine in February 2022 triggered what the International Energy Agency (IEA) described as ‘a full-blown energy crisis’ that sent the price of natural gas and, in some markets, electricity to record heights while oil prices rocketed to their highest level in 12 years.