Fraser Institute: 'Robust economic growth as the world emerged from the pandemic, coupled with the world’s strong reliance on abundant and affordable energy from fossil fuels, has led to a significant post-COVID rebound in oil and gas consumption. According to most forecasters, oil and gas will continue to be a large component of the world’s energy mix in the next decades even in the most conservative estimations. In fact, projections show that, at least in the medium term, demand for these conventional energy sources will increase and they will continue to fuel economic growth, particularly in developing countries.
'However, a combination of market forces and government policies is threatening global energy security as demand for oil and gas is expected to increase in the coming years without a commensurate increase in supply. Declining investment as a result of volatile commodity prices and aggressive climate policies, in combination with the West’s response to the war in Ukraine, risk limiting the world’s ability to supply this growing demand. The inevitable consequence of this supply and demand mismatch is an energy shortage that will lead to higher energy prices for a sustained period of time, hampering economic growth and increasing the cost of living.
'Nowhere is this truer than in Europe, which is experiencing its worst energy crisis in decades. For the last twenty years, governments across Europe have intervened in the region’s energy markets by drastically altering the composition of its energy mix. In particular, European climate policies have strongly encouraged the proliferation of wind and solar power at the expense of coal and nuclear. Yet because renewables (wind and solar) cannot fully support European demand for electricity due to their intermittency, the market has become increasingly dependent on natural gas—a predictable and dispatchable energy source—as a marginal supplier in times of high electricity demand. But European climate policies have also resulted in significantly lower domestic natural gas production and storage capacity, making Europe reliant on Russian natural gas imports. Specifically, several EU countries, such as Ireland, Germany, and France, have banned fracking, which effectively impacted the region’s ability to produce the reliable and affordable energy they need. Another example is the EU’s soaring carbon prices, which are driven by the region’s ambitious climate policies and targets. For most of its history, the European Union had modest carbon prices, typically under 15 euros per tonne. Yet recently the carbon price has risen very rapidly, going from 22 euros per tonne in early 2020 to more than 60 euros by the fall of 2021 and 90 euros by December 2021.'
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