The price of oil and other commodities is one of the
hot topics in the corridors of power in the world, regardless of the economic
status of the country in question, because the rising price of oil, gas and
coal have already taken its toll on the recovery of the global economy as a whole,
despite the soothing soundbites to the contrary.
It’s an undeniable fact that there are supply chain
issues in all major economies, exacerbated by labour shortages and of course,
an acute dearth of truck drivers to transport goods and fuel through the internal
arteries of the countries concerned.
When the world thought that the supply of coal is
stabilising, especially in the world’s second largest economy, China, it has
been forced to fight on yet another new, unexpected front – a severe cold
spell, engulfing over 90% of the vast nation of over 1.1 billion people.
The plummeting temperature did not even spare its
remotest tropical islands.
This has come about defying the pundits who had predicted
a warmer winter ahead.
Although China claimed that during the past few days its coal stocks had reached a satisfactory level with a reasonable surplus,
judging by the scale of the unprecedented cold snap, the authorities will be
forced to power up generators for longer – and at fast pace – in order to face
the demand.
China, which experienced serious power shortages in
October, knows the impact of yet another round of the same issue on its
economy: its manufacturing PMI has been in decline for over six months,
something that China blames on supply chain issues and rising cost of raw materials
and of course, energy.
As of 11:45 GMT, the price of natural gas was $5.62,
an increase by 1.84%; the price of WTI and Brent, meanwhile, stood at $82.44
and $83.73 respectively.
China has been taking measures to cut down on the
use of coal for power generation, while gradually switching to the next in the
list of ‘dirty fuels’, gas, which in turn contributed to the steep hike in gas
prices.
It, however, will not end with that, when power
companies start switching to oil as a temporary, cheap alternative; it will
undoubtedly increase the price of crude oil further, triggering off a major
political issue in addition to the existing economic problems – pitting even
allies against one another.
Since repeated pleas to the OPEC+ fell on deaf
years, politicians have turned the cartel into a convenient scapegoat. Having come
under pressure from all directions, the OPEC+ only tries to embark on a damage
limitation mission, while blaming its inability to address the issue on the
lack of investments in the sector for years.
There is certainly some truth in it. Unfortunately,
the OPEC+ has not been articulate enough in presenting its side of the story,
exactly like the way it is handling the decarbonising issue in the presence of
growing global displeasure; the cartel simply cannot get away with these thorny
issues, using the tactics that were at its disposal decades ago – and when
there was no substitute for the commodity.
Having felt the pinch of the global outcry over the
issue, the oil minister of the OPEC+ said yesterday in an interview with a
Dubai-based TV channel that the group will listen to the grievances over the supply;
he, however, said that the underinvestment was a cause in inhibiting the
progress on this front.
As far as major global powers are concerned, the
energy crunch could not have come about at a worse time, when they have to
compete with one another to shine on COP26 climate conference; any misstep is a
guaranteed pass to the political oblivion.
