One year of Ukraine crisis: How it sparked a global energy crisis
The ongoing conflict between Russia and Ukraine has had a significant impact on the global energy market.
Disruptions to the supply of gas from Russia, one of the world's largest producers of oil and gas has resulted in shortage of gas as well as rising inflation particularly in Europe.
According to the International Energy Agency (IEA), Europe depended on Russia for around 40 percent of its natural gas imports before the conflict. However, the disruption to the supply chain has caused a substantial reduction in the amount of natural gas that Europe can import from Russia, resulting in a severe shortage of this essential resource.
Many European countries have been increasing their reliance on alternative energy sources to mitigate the risk of a gas cutoff. Germany, Europe's largest gas consumer, has been investing heavily in renewable energy like wind and solar power. The country also increased imports of liquefied natural gas (LNG).
Other countries are also taking steps to reduce their dependence on Russian gas. For instance, the United Kingdom has been investing in new pipelines to import gas from other countries, such as Norway. The country is also increasing its use of domestic sources of gas, such as shale gas.
European governments have spent nearly 500 billion euros ($496 billion) in the past year to support citizens and businesses affected by the sharp increase in gas and power prices, according to Bruegel, an independent think tank based in Brussels. Notably, the continent has experienced similar episodes in recent years.
In 2009, a gas dispute between Ukraine and Russia led to a cutoff of gas supplies to Europe where large parts suffered energy shortages. The supply disruption led to a sharp increase in gas prices, with some countries experiencing record-high prices.
The crisis was particularly severe in Eastern Europe, where many countries rely heavily on Russian gas supplies. Bulgaria, for example, experienced a complete cutoff of gas supplies, while other countries such as Slovakia and Serbia saw significant reductions in supplies.
Vulnerable global energy market
The situation in Ukraine has impact the global oil prices. The conflict has raised concerns about the stability of the Middle East, which is a major oil-producing region. Many countries are worried that the conflict could spread to other parts of the world, leading to a disruption of oil supplies.
In January 2022, oil prices surged to their highest level in over three years, as investors worried about the impact of the conflict on global energy markets. Prices have since fallen, but the situation remains volatile.
The conflict's impact on global energy markets is not limited to Europe and the Middle East. Many countries in Asia are also heavily dependent on energy imports. For example, Japan is the world's largest importer of liquefied natural gas (LNG), and the country is heavily reliant on imports of oil and gas to meet its energy needs.
Western countries have imposed sanctions on Russia, such as the prohibition of exporting energy extraction equipment and technology support to Russia, and the withdrawal of relevant investments in Russia's energy industry.
Meanwhile, the countermeasures taken by Russia resulted in a further tightening of the global energy supply chain, leading to a strained market supply and fluctuations in the energy market.
The World Energy Outlook 2022 report by IEA warns of an "unprecedented energy crisis" globally, which could lead to over 75 million people worldwide being unable to afford electricity - the first time that number increased since the agency started tracking.