Escalating Global Energy Crisis: What’s Causing This?

October 15, 2021

There is a geopolitical power struggle right now that isn’t getting a lot of attention in the news and will have an impact on you soon.  It is a struggle over existing energy resources. Many countries are scrambling to get enough potential energy to keep the lights and heat on through winter or are rationing energy to allocate power to manufacturing resources.  You may not see it until the lights go out for you or your inability to get certain items as manufacturing may soon slow down even more due to the lack of fuel, which is why you need to know what is happening now.

We have never before seen a series of problems in the energy supply and reserve levels that were of this magnitude, and recovering from this may take a global, Herculean effort.  The reality is that it is not likely to happen.  In this video, I will explain some of the problems countries are having, the reason these problems exist and persist, and what you should be doing now to insulate yourself from this looming energy supply problem.  So, let’s jump in…


Here is an unsettling fact: of the top 20 economies globally, 16 of them have some form of an energy crisis or shortfall.  Those 16 countries account for over 90% of the electrical energy consumption in terawatt-hours worldwide.  Each country has a unique set of problems compounded by a few common factors.  I will address the three main factors in a moment, but a quick study and simplification of the many issues the major countries face is helpful to understand the bigger picture.  At the risk of oversimplifying things, a global energy crunch caused by weather and a resurgence in demand is getting worse.  There are also complications as more people push governments to transition from fossil fuels to cleaner energy options.

At the country level, China is by far the largest consumer of electricity because of manufacturing.  Their consumption of energy in terawatt-hours, a unit of energy equal to outputting one trillion watts for one hour, eclipses all other countries worldwide.  In China, rolling blackouts and rationing of provinces based on the needs of manufacturers have already begun.  Roughly 60% of China’s energy is created from coal. China recently stopped buying coal from Australia in protest of Australia’s call for an international investigation into the origin of the Covid-19 pandemic.  That has left tens of thousands of tons of coal on scores of ships, stranded out in the water like thousands of other vessels with unsold coal on them.  There is no central mechanism here, so the coal isn’t being rapidly resold to India or some other country needing it. However, it eventually will quickly be snapped up and resold.

Another coal-dependent country and manufacturing powerhouse is India.   Fifty percent of India’s 135 coal-fired power plants currently have less than two days supply of the coal they need to operate, and power stations can’t get enough to maintain operation.  There has been an unprecedented increase in the demand for electricity due to the revival of the economy, following a COVID peak in April of a staggering and nation-crippling 414,000 cases. Heavy rains in coal mine areas during September adversely affected coal production and the transportation of coal from mines.

Natural gas isn’t any better.  In East Asia, natural gas is up 85%.  Even in the United States, an exporter of natural gas, prices are up 13%.  Europe’s need for natural gas is drawing imports of American liquefied natural gas, or LNG, across the Atlantic, feeding into higher prices for gas in the U.S. itself. Europe is also seeking to form contracts and secure supplies from Russia, Europe’s biggest supplier.

European leaders are preparing for another brutal winter.  Last winter’s unprecedented cold and more people at home during lockdowns brought heating oil and natural gas reserves to an all-time low.  Gas production in Europe has declined precipitously in recent years, leaving Europe more dependent on fuel from Russia, Norway, and the U.S.  Russia would love to sell natural gas and fuel oil, but the U.S. has tried to block that in favor of Ukraine and to further sanction Russia for its invasion and annexation of Crimea.  The fear, of course, is that once the pipeline is in operation, Moscow will use gas as a cudgel to force European countries to do its bidding.  Right now, if natural gas were priced like Brent crude oil, it would be trading in the EU for the equivalent of $230 per barrel, and that’s three times the price of oil.

In Brazil, low levels in the hydroelectric reserves stemming from the driest summer in 91 years have sparked blackouts and power rationing for the end of this year and likely for the next two years.  Japan’s power prices, reeling from the global strain, just hit a 9-month high.  Utilities in Japan and South Korea are protected mainly by long-term LNG contracts indexed to oil.  Shifting demands in natural gas strain those contracts, and prices skyrocket.   Both Canada and the United States are feeling the pinch of acute fuel prices needed for vehicles and to heat homes.


So, what’s going on?  How did it get this so far out of alignment?  Three main factors are at play.  First, there was a period of downtime in the production and distribution of fossil fuel sources during the pandemic.  This has caused many countries to reduce significantly or deplete their reserves.  Now, there is a bold resurgence in manufacturing and demand; simultaneously, supply lines are stretched, strained, or broken altogether.  While many countries would love to increase production to 150 or 200% to meet demand, the shipping capabilities, workers, and energy resources aren’t there to do so.

Second, many countries like Europe and the United States suffered through one of the most brutal winters in recent history last year.  Many early forecasts are predicting an equally bad or worse winter this year, which has many countries scrambling to find the energy resources they need for their population.  Add to this the number of billion-dollar natural disasters at a record high, and even the United States might be tapping its strategic oil reserves.  There were 22 disaster events that each caused at least $1 billion in damage in 2020, and there have already been 18 in 2021. It’s likely the United States will break that record high yet again this year.  Each disaster requires an excess share of energy resources to fuel the recovery efforts.  This, again, when supply lines are strained.  For more on this, you can watch my video on the trucking crisis Still, you don’t have to study the problem too much to understand that trucks not delivering fuel and heating oil will create shortages even if all 135 refineries had an abundant supply of oil to process and were working at total capacity.  The three largest-volume products of U.S. refineries are gasoline, fuel oil (including diesel fuel and home heating oil), and aviation fuel.

In anticipation of the brutal winter and having suffered last year through a particularly harsh winter, Europe has turned to Russia for cheap natural gas, snubbing Ukraine in the process.

The third main factor in this crisis is the same problem we see throughout the supply-demand-delivery system–it was too finely tuned. It was incapable of absorbing such turmoil and disruption.  After many years of operating in relatively the same manner, the system found itself within a narrow range of demand, a specific need for production, and a specific need for all of the manufacturing–from the creation of plastics from petroleum to the energy needed to create microchips.  Sure, there was the occasional disruption here and there, like the cyberattack on the Colonial pipeline, a natural disaster, or a hemisphere’s particularly bad season. Still, the more extensive system typically absorbed these disruptions and turmoil, and the energy gaps were supplied by other countries or other types of energy.


The system could almost be written out as an equation.  The anticipated energy needs for the year would be X.  X would embody all forms of anticipated energy resources needed from coal, to oil, to solar, to petroleum, to the plastic being derived from the petroleum for manufacturing.  We often hear stories of Opec ramping up or throttling back production to keep a profitable price point.  Their control and other countries’ controls of the production of raw energy fixed and regulated prices according to total anticipated demands.  The sum of all energy produced from all sources (coal, petroleum, wind, solar, hydroelectric, nuclear, and so on) would require Y amount of output from all mining, drilling, refining, and manufacturing sources.  That would then require Z number of workers to produce the materials of energy, make and shape the materials from fossil fuels, like plastics, move the energy materials from point A to point B, and so forth.  There is a vast, non-automated, human component to the equation.  And, finally, you have the variable C, the consumer.  Now, let’s look at each, starting there, and how they’re failing or have failed.

C, the consumer, tectonically shifted demand as a result of lockdowns.  Over 100 countries worldwide had instituted either a full or partial lockdown by the end of March 2020, affecting billions of people.  Consumer consumption shifted away from luxuries of dining out, entertainment, and leisure to online purchases and necessities of living at home.  At the same time, businesses and manufacturers closed their doors, shut down, and laid off or let go of employees.  Every economy in the world was impacted.  Many of those businesses and manufacturers have had a hard time enticing employees to return to a work lifestyle that had them struggling more than 40 hours per week away from their families.  The energy demands of C, the consumer, shifted away from manufacturers and to the individual consumer, but they put it right back on the manufacturers by exponentially creating demand.  Manufacturers are struggling to meet that demand or even restore themselves to pre-pandemic levels.

So, Z, the number of workers to produce and the materials of energy, to make and shape the materials from energy, like plastics, to move the energy materials from point A to point B, and so forth, suffering still from a lack of workers for refinement, production, manufacturing, and transport of energy and goods and products from that energy.  If you can’t produce the plastic from the petroleum because you can’t get the oil or you can’t get the plastic on a ship or truck to the manufacturer, or the final product off the loading dock of the factory to the consumer demanding it, there’s a huge problem.  The worker variable of the energy equation is out of whack too.

Y, the sum of all energy produced from all sources that required a specific output from all mining, drilling, refining, and manufacturing sources, suffered from shifting demand, inclement weather, brutal cold, wildfires, droughts, a cessation of mining activities, politics, shipping and logistics problems, a worker shortage, and more.  So, the ordinarily stable quantity of energy produced variable Y has been thrown wildly out of its normal numerical range.

With C, Consumers, Z, workers, and Y, the total energy and byproducts of energy produced entirely out of sync, you can probably guess that our original X, the total anticipated energy needs for 2021, is also totally out of whack.  Taken together, all the exponents cycled together and absorbed small fluctuations over the years.  When something broke down here or demand rose over there, or a war broke out somewhere, these hits were absorbed into the global supply and remedied, or at least dealt with in a short time.  That worked when one region or country suffered, but it doesn’t work when the entire global production and consumption equation is turned on its end.  That doesn’t work when 50% of the Earth’s countries lockdown, shift their priorities and change their energy consumption patterns, demands, and needs.

There’s a short circuit in the energy equation, and suddenly there are wild fluctuations in all the variables.  That makes plugging in a single solution all the more difficult, if not impossible.


So each country is scrambling to re-establish reserves, secure a future share of energy, maintain and strike a balance sustainable for the future, and meet the essential needs of its people.  Political leaders and captains of industry know their longevity depends on the stability of energy.  People will only suffer so long without heat before they deconstruct the mansions of the rich to get fuel for their fires.

The EU has turned to their nemesis Russia to fill the void, and the United States can’t consciously argue against their necessity to do so.  Having snubbed Australia’s supply of coal, China is forced to cut back, ramp up their own coal mining, or secure other sources from other countries equally in need.  Imagine a functioning machine with lots of belts and wheels and cogs.  That was the energy production and consumption system of a few years ago, and it was functioning and mostly meeting the needs of manufacturers and consumers.  Now imagine all those belts, cogs, and wheels suddenly changing in size.  That’s consumer demand and economies suddenly contracting, reducing output, then increasing demand.  When all the machine parts suddenly change size, the machine smokes, sputters, and fails.  That’s where we are today.

The only solution that can avert the further breakdown of the machine would be for the parts to revert, even slowly back to their original sizes.  For that to happen now, consumption has to decrease, which isn’t likely.  Manufacturing would have to decline in the face of rising demand.  That’s not likely to happen either as we head into a holiday season.  Weather patterns would have to not be so brutally cold in the wintery North and scorching hot in the summerly South.  That’s a lot of things that have to fall in place together, and they are not likely to happen.

There may not be a solution, but to let this play out, resulting in everyone worldwide taking their fair share of the suffering required.  For you, expect higher prices on everything from utilities to gas to the products made from them.  Expect the genuine possibility of rolling blackouts, rationing, or complete failures of power systems lasting not hours but stretching into days and maybe weeks.  Reducing consumption while ramping up and restoring production is the only solution, and that still doesn’t address the problems of an aging power system I haven’t even covered here.

If you have considered a whole-house battery and solar system to gain a little independence from the grid, you may find it is too late because the parts for that system aren’t available right now.  If you haven’t taken measures to obtain emergency power sources like solar or gas generators for when the main power goes offline, you may have difficulty getting a generator now.  Your best solution is to reduce your dependence on the central systems that may fail, learn to live with significantly reduced consumption, or prepare to go without altogether.

When the power goes out for you, make sure you have the food, water, and heat to get you through this winter.  Take a look at what happened in Texas earlier this year, and how people got through that disaster.  Look at the success stories of those who were fine and copy them.


The world is facing a global power crisis at the same time it is trying to restore economies and braces for continued harsh weather.  We may emerge stronger one day, but right now, we have to prepare for the situation to get much worse and the energy equation to continue to fluctuate wildly.  One thing is for sure; the global energy crisis is going to come to your home.  There’s no avoiding it.  At the absolute very least, you’ll see it in the form of another increase in the price of everything.  You may experience it even more directly in the form of rolling blackouts or in the availability of gas in your region drying up and pumps out of service.  Some countries may even experience civil unrest as their citizens rebel against what they perceive as mismanagement of vital resources and needs.

Prepare for the worst and take heed.  This crisis is in its early stages still and will continue to get far worse before it gets any better.  What do you think?  Are you feeling the global energy crisis in your region or country?  What’s your plan for when the energy stops flowing? 

As always, please stay safe out there.

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