Before we become too enraptured with mainstream media headlines about “energy shocks” and “energy crisis”, there is one very important fact to consider: We are not short on crude oil or natural gas. As a cartel, OPEC can choose to produce more at any time. It chooses not to. That is a form of price manipulation. Russia is withholding natural gas from Europe, presently holding gas hostage at a time of European crisis until Germany certifies Nord Stream 2 to go live. That is also price manipulation - and a form with which we are all familiar.
As participants in a free market, American shale cannot, as a group, “choose” to produce more crude oil. It produces only what its shareholders will allow; and right now, investors don’t want shale to ramp up production significantly. That is not price manipulation. American shale is not beholden to a cartel; rather to a diverse group of investors who want the patch to remain disciplined and will simply withdraw money if it’s not.
Apart from weather-related disruptions in the Gulf of Mexico (which disrupted natural gas supplies) and India (where flooding has disrupted coal production), the only actual shortage the world is dealing with is renewable energy.
The lesson here is to be careful what power source you rely on most. That reliance dictates your level of “crisis”. Italy, the UK, Germany, and Spain all rely heavily on gas for power generation.…
Before we become too enraptured with mainstream media headlines about “energy shocks” and “energy crisis”, there is one very important fact to consider: We are not short on crude oil or natural gas. As a cartel, OPEC can choose to produce more at any time. It chooses not to. That is a form of price manipulation. Russia is withholding natural gas from Europe, presently holding gas hostage at a time of European crisis until Germany certifies Nord Stream 2 to go live. That is also price manipulation - and a form with which we are all familiar.
As participants in a free market, American shale cannot, as a group, “choose” to produce more crude oil. It produces only what its shareholders will allow; and right now, investors don’t want shale to ramp up production significantly. That is not price manipulation. American shale is not beholden to a cartel; rather to a diverse group of investors who want the patch to remain disciplined and will simply withdraw money if it’s not.
Apart from weather-related disruptions in the Gulf of Mexico (which disrupted natural gas supplies) and India (where flooding has disrupted coal production), the only actual shortage the world is dealing with is renewable energy.
The lesson here is to be careful what power source you rely on most. That reliance dictates your level of “crisis”. Italy, the UK, Germany, and Spain all rely heavily on gas for power generation. Norway and Sweden rely most heavily on hydropower. France relies most heavily on nuclear power. Only in Sweden and Norway are cleaner energy sources built up enough to reduce the impact of skyrocketing natural gas prices. Volatility is the cost of the relatively slow, incremental adoption of renewable energy.
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