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While a World is Fighting Climate Change, Fossil Fuels Take Revenge

Oil Price swing $ 0 to $130 in 2 years

The price of crude oil has dropped to below $0 dollars a barrel, a record low on 20th April, 2020 due to the coronavirus pandemic due to surplus in supply and a significant drop in demand,

But the world is in the grip of an oil price shock. In just a few months, prices have risen from US$65 a barrel to over $130, causing fuel costs to surge, inflationary pressure to rise and consumer tempers to flare. Price shocks aren’t new. Viewed historically, they are an integral part of oil market dynamics, not anomalies. They have occurred since the birth of the industry.

Many factors can trigger oil price shocks such as large shifts in either demand or supply anywhere in the world since oil is a global commodity. Shocks can also result from war and revolution; periods of rapid economic growth in major importing nations; and domestic problems in supplier countries, such as political conflict or lack of investment in the oil industry.

Current Shock in 2022

Countries around the world are struggling with energy shortages and price spikes as energy security and affordability are propelled to the policy centre-stage after Russian tanks rolled into Ukraine. Yet it would be myopic to view surging energy prices merely as a result of the Russian invasion.

The recent price spikes in fuels are a cumulative result of government policies in the West that have focused obsessively with the speculative, model-based forecasts of the climate impacts of carbon emissions. The climate industrial complex has vilified fossil fuels over the past few decades in the name of a presumed impending climate apocalypse. It starved the oil, gas and coal sectors of capital investments and diverted trillions of dollars of public funds to subsidize wind, solar and electric vehicle industries.

After decades of shutting down reliable (i.e. dispatchable power 24/7) coal and nuclear generating plants and replacing those with erratic, weather-dependent solar and wind power, national grid of USA & many other countries are now destabilized and vulnerable to surges in demand and supply. Last year’s near-catastrophic blackout in Texas, after a sudden cold snap, is just illustrative of this.

Europe and the UK, global leaders in the “energy transition” efforts, also face potential blackouts as aggressive retirements of nuclear, coal and gas-fuelled plants have been replaced by unreliable renewables over the past two decades.

A shortage of gas this winter could leave 6 million homes in the UK without power. True to “the revenge of fossil fuels” theme, the government has asked coal power stations it had previously ordered to close down to remain open.

While Europe’s sanctions on Russian energy exports have accentuated the energy crisis in the continent, the EU’s rapid and forced transition away from fossil fuels towards reliance on renewables constitutes the essential backdrop to the dire state of affairs in energy security and affordability.

Perhaps most astonishing in the self-inflicted energy crises in the West are the surreal statements made by members of “sanctimonious” policy and business elites in media on global stage

Why the World still needs Fossil Fuels

An estimated 3.5 billion people of the poor of the developing world, primarily in sub-Saharan Africa and South Asia lack access to reasonably reliable and adequate electricity supply. In the five-year period to 2019 (prior to the onset of the pandemic), developing countries accounted for almost 90 % of global demand growth for primary energy; the Asian developing countries claimed nearly three-quarters. As the developing world, especially the rapidly-growing populous economies of Asia (mainly China & India), emerge out of the pandemic lockdowns, access to affordable fossil fuels will be critical to their development prospects over the next several decades.

As per recent Research, giant global asset managers are still dumping tens of billions of dollars into new coal projects and hundreds of billions of dollars into major oil and gas companies as green stocks became flops in 2021, lagging even airlines. In fact, coal, oil and gas have powered urbanization, industrialization and agricultural productivity; going up the conventional energy ladder has led to improvements in the standards of living for the vast majority of the global population including the now developed countries.

While the World is Fighting Climate Change, Fossil Fuels Take Revenge


Ø China, India, and other developing economies are driving the demand for coal, but even the US is poised to increase its consumption of the dirtiest fossil fuel in almost a decade, according to a forecast from the International Energy Agency.

Ø China is being hit by a succession of large-scale electrical outages, leading to a serious energy crisis against the backdrop of soaring coal prices. Moreover, the power supply crisis from surging fossil fuel prices is now spreading from China to India.

Ø The energy crisis has been concentrated in the power generation sector.

Ø Shortages of natural gas and electricity have been especially acute in China and the UK.

Ø Demand for coal is moving back near peak levels

Ø The energy crisis, the coming winter weather, and the release of pent-up pandemic demand have sent nations scrambling to stockpile fossil fuels, a move that portends a rebound for global carbon dioxide emissions this year.

The trajectory poses a new threat to the Paris Agreement goal of limiting global temperature increases to 1.5C.

The world’s CO2 emissions peaked just prior to the onset of the Covid-19 pandemic, and then in 2020 registered the biggest annual decrease since at least 1965. Releases of the greenhouse gas this year through August are just 1% less compared with the same period in 2019.

Whether emissions reach new highs will probably depend on the weather.

Power Crunch in China

In addition, there are predictions of liquefied natural gas (LNG) shortages in this coming winter, which the pundits say might be even worse than that in January 2021. In China, regions subject to power supply restrictions have expanded since September, with frequent power outages in about 20 provinces, including Guangdong, Zhejiang and Liaoning. In Guangdong Province, where there is a concentration of manufacturing industries, factories serving companies of Japan, America and other nationalities are being driven into suspending their operations in succession.

In China, where coal-fired thermal power generation accounts for more than half the country’s electricity, steep rises in coal prices have resulted in curbs on the operations of thermal power stations, triggering acute power shortages. Beijing’s ban on coal imports from Australia, which is on bad terms with China, has also spurred hikes in coal prices.

In response to the energy crisis, China has partially lifted the ban on Australian-produced coal and is procuring LNG in large quantities. While China says its goal is to reduce greenhouse gas emissions to zero by 2060, at least for the present Beijing is expanding its acquisition of fossil fuels while it weathers the current energy shortage.

Power Crunch in India

India is expected to face a wider coal shortage over expectations of higher power demand. India is experiencing a devastating heat wave, with temperatures reaching as high as 140 degrees Fahrenheit and testing the “limits of human survivability”. Temperatures in March and April were the highest India had seen in over a century, driving unprecedented spikes in energy demand as Indians turned to fans and air conditioning to beat the heat. To make matters worse, soaring electricity demand has outstripped India’s available energy supply, driving widespread power outages across the country. To stop the blackouts, the Indian government is taking steps to dramatically ramp up its use of coal power.

Energy prices are soaring in Europe and experts say it “could get a lot worse”.

Energy prices affect lower incomes hardest. Green issues can get votes, but only if they don’t affect rising living costs. It’s one of the main reasons why 2022 will be a year of unrest. As per Goldman Sachs, Oil could hit $140 a barrel this summer. The spike in oil prices comes as Russia continues its invasion of Ukraine and Western countries drastically scale back imports of Russian oil, shaking the global energy market.

There will be a tight transition from old to new energy but not because of green energy itself.

There are 3 main levers for climate change action:

1. the capital markets

2. the consumer, and

3. global politics

The governments need to plan for the energy transition they know is coming. They have known this since Paris in 2015 — and, as we know, much has happened to the world since then.

This is what will need to happen:

· Global politics: Much depends on the follow-up, extra COP conference in Egypt this year, where they will be reviewing the financial commitments.

· Consumers: demand needs to grow. The pressure on government, and the incentive to companies, does not happen in a vacuum. It happens because people ask, request, demand.

· Taxes. There are tax solutions here. Again, a touchy topic for governments and it does not fit well with their short term politics.

Decreased Resource Development

The worldwide surge in fossil fuel prices is attributable to the recovery of demand alongside a trend toward decarbonization. In the past, when fossil fuel prices spiked, resource-rich countries moved to expand production to cool down the market. However, with the spreading decarbonization movement along with increasing reliance on renewable energies, resource-rich countries are also changing their behavior. Decarbonization initiatives have been gaining momentum in industrially advanced countries through the withdrawal from fossil fuel developmental projects of such resources as coal in rapid succession. The reluctance of financial institutions to fund fossil fuel projects is a major factor in this connection.


The reality is that fossil fuels have remained the world’s major source of energy. Thus, Fossil fuels have begun “striking back,” just as efforts to tackle the challenge of decarbonization have begun around the world. Prices for fossil fuels such as coal and natural gases have been rising rapidly on the world market.

CA Harshad Shah,

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