Why energy prices are spiking globally and how it affects green initiatives

Gasoline prices are on the rise, along with the cost of home-heating oil and natural gas. But international energy officials at the Russian Energy Week event on Thursday warned of a global energy crunch that could slow the economic recovery from the pandemic. Nick Schifrin has more.

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  • Judy Woodruff:

    Gasoline prices are on the rise. And it's the same for home heating oil and natural gas.

    But, today, the head of the International Energy Agency warned of a global energy crunch that could slow the economic recovery from the pandemic.

    The root causes? Demand and high prices.

    Nick Schifrin has more.

  • Nick Schifrin:

    We're in the midst of an energy crunch perhaps unlike we have ever seen. In the U.S., the price of natural gas has more than doubled. In Europe, it's increased more than four-fold.

    The price of crude oil has gone from an all-time low of minus $37.63 in April last year to over $80 a barrel today, the highest it's been since 2014. And the pain is universal, from the consumer in France to the factory owner in China, which, for its own reasons, launched unprecedented power cuts.

  • Jean-Christian Valentin, Yellow Vest Protester (through translator):

    If you go to the poorer areas where there is suffering, no one puts on the heating, because everyone knows they won't be able to pay for it.

  • Gao Lai, Factor Owner (through translator):

    The power curbs lasted for four days. To be honest, we can afford it. But if it goes on longer, then the costs are too much, and we won't survive.

  • Nick Schifrin:

    Today in Moscow, the energy ministers responsible for more than one-third of the world's energy spoke on one panel at Russia's annual Energy Week conference.

    It was moderated by special correspondent, Ryan Chilcote, who joins me now from Moscow.

    Ryan, good to see you.

    So why has want market gone crazy?

  • Ryan Chilcote:

    Thanks, Nick.

    Well, the reason the market has gone crazy is really off-the-chart demand, particularly in Asia, particularly when it comes to natural gas. The lockdowns are over. Industry is running, and they need that natural gas like there's no tomorrow.

    So, when they can get their hands on it, they do. And when they can't get their hands on it, they will buy other forms of energy, like coal, for example, which has also risen by some three-fold, and oil, which is another reason why oil is up.

  • Nick Schifrin:

    But it's not just demand right, Ryan? There are other reasons for these price spikes?

  • Ryan Chilcote:

    Absolutely.

    I mean, weather is one. So we had a very cold winter last year, and people are anticipating another cold winter, so you get hoarding. Lack of investment. During the lockdowns, there was a lot of uncertainty about the future, so people didn't put money into oil and gas.

    Plus, with responsible investment, ESG, putting money into oil and gas is just not particularly popular, so money didn't flow for that reason either.

    Then, of course, you have the issue of renewables not always being reliable. Bob Dudley, you may remember, was the CEO of BP. He runs an industry body called the Oil and Gas Climate Initiative. They represent 12 of the biggest energy companies out there that produce oil and gas other, but they also work with renewables.

    And they said, quite frankly, this last year, when it comes to renewable energy, has been a little bit of a letdown.

    Robert Dudley, Chairman, Oil and Gas Climate Initiative : These are not to blame on anyone. These circumstances came up very quickly. The wind didn't blow like it was supposed to, or people thought in Europe this year, and the U.K., which is a clue about why we need resilient fuels and backups and natural gas as well.

    I think you're seeing, because of these high prices, actually switches to coal now around the world. Not good for the environment.

  • Ryan Chilcote:

    So, everything is just kind of out of whack right now in energy markets.

  • Nick Schifrin:

    The U.S. has called on OPEC Plus, which includes, of course, Saudi Arabia and Russia, to increase production as a way to reduce prices.

    What's been the response to those U.S. requests?

  • Ryan Chilcote:

    The response has been, we think we're doing enough right now. Within OPEC Plus, which is a large group that, as you pointed out, crucially includes Russia, but also Saudi Arabia, really the first amongst equals in OPEC Plus, they think that they're providing enough oil to the market.

    The most powerful man in the oil industry in the world is arguably Saudi Arabia's energy minister. And I asked him about just that.

    Prince Abdulaziz Bin Salman, Saudi Arabian Minister of Energy: We want to do it in a gradual, phased-in approach. And we believe we will have a challenging year on '22 if we don't attend to this situation.

  • Ryan Chilcote:

    Why not make, for example, the Biden administration's day and give them more oil?

  • Prince Abdulaziz Bin Salman:

    Well, it's not about making anybody's day. It's about finding a solution, a remedy to the root cause of the issues.

  • Ryan Chilcote:

    Off camera, though, a lot of OPEC countries and their ministers tell me they do think that OPEC Plus should be providing more oil to the market. They're concerned that prices are this high.

    And they worry about things like demand destruction. In other words, when prices get really high, people stop buying fuel. And that has economic consequences. It weighs on economic growth. And so that's not good for them.

    They're also concerned that, just a couple of weeks away from COP 26, it's just not a good look to have oil as expensive and other forms of energy as expensive as it is, because they're arguing, going into COP 26 that oil and going to be necessary transition fuels as the world goes to greener energy.

  • Nick Schifrin:

    So let's examine that a little bit more.

    As you say, COP 26, the world's largest and most important climate conference, coming up in Glasgow in a few weeks. What did the oil minister stay today specifically about what today's energy crunch says about the future transition to green?

  • Ryan Chilcote:

    They say that this energy crunch that we're seeing right now is really a lesson that, as we go forward in this transition, you're still going to need oil and gas.

    Have a listen.

  • Robert Dudley:

    Ryan, if you think about it, the data is amazing. Most people don't realize that, including many the representatives of the COP.

    1999, 81 percent of the world's energy was oil, gas and coal. 2019, 81 percent of the world's oil and gas and coal produce the energy. By 2050, we will have two billion more people on the planet. We're going to need all forms of energy, and we have got to take the emotion out of it.

  • Ryan Chilcote:

    So, some of the biggest energy watchers out there, IHS Markit, say the same.

    They say that, even if governments around the world are really strict on the use of hydrocarbons, oil and gas, there's still going to be a need for about 55 million barrels worth of oil and gas a day. The world right now consumes about 100 million. So, in 2050, what, nearly 30 years from now, we're still going to need, according to a lot of the industry watchers out there, about half as much oil and gas as we use today.

  • Nick Schifrin:

    I think activists would hear Bob Dudley talk about emotion and say that this is now the time to start transition to green.

    Wouldn't you expect, Ryan, for oil ministers to say that, of course, we need oil indefinitely?

  • Ryan Chilcote:

    Absolutely. They have their industry needs in mind as they're talking about this.

    But they also think that there's a certain naivete out there, and that people just really don't understand what is going to be required by what is an extraordinary energy transformation that we're going to be involved in over the next 30 years.

  • Nick Schifrin:

    Ryan Chilcote, reporting from Moscow, thank you very much.

  • Ryan Chilcote:

    Thank you.

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