Energy and geopolitics
5 questions for a clearer vision!
What is the impact of the war in Ukraine?
The war in Ukraine revealed Europe’s severe energy vulnerability. Russian gas accounted for nearly one-third of demand, with wide discrepancies between countries (nearly two-thirds of Russian gas in Germany but less than 20% in France, for example). Energy prices soared as Europe tried to source gas in other markets (Algeria and Azerbaijan by pipeline, USA and Qatar by LNG carrier, etc.). In contrast, the U.S. was able to count on its oil and shale gas deposits.
The energy crisis: how did we get here?
Tensions in energy markets began at least six months before the invasion of Ukraine. As early as fall 2021, the price of gas rose sharply as the world emerged from the Covid pandemic. The economy, and therefore demand for energy, bounced back faster than expected, while supply struggled to keep pace, largely due to insufficient investment during the pandemic. This had a knock-on effect on the electricity market, as the price is determined by the price of the lowest ranked plant by profitability, which is generally a gas-fired power facility.