Russia-Ukraine war reminds how the world depend on oil energy

May 28, 2024 by
Russia-Ukraine war reminds how the world depend on oil energy
ABI-VNM - Abivin Vietnam, Phạm Nam Long
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For most people, the war in eastern Ukraine has disappeared from mainstream news. But look a little closer at the wider geopolitical picture and it’s clear the world hasn’t come to an end. The Russia-Ukraine war reminds us how the world is still very dependent on oil and gas for energy. And most of all, we need to understand how such geo-strategic conflict will impact energy supply and prices in the future. With a weakening oil price and economic sanctions against Russia, who has been a major supplier of natural gas to Europe, things could not be worse for this energy market. The following article gives you more details about what's going on between Russia and Ukraine as well as how it will impact the world economy.

Why is the world still dependent on oil and gas for energy?

Gas and oil still dominate the energy landscape. Despite tremendous progress in renewable energies, these are still very much in their infancy. There is also still a lot of uncertainty about how long it will take for renewables to become an important alternative. This is further complicated by the fact that many countries have still not decided if and how they want to invest in renewables. This is especially true for the major energy consumers, like the U.S., China, the EU and Japan. They all have ambitious climate change policies but do not know how to achieve those goals without harming their economies. The problem is that renewables need a certain amount of energy to be produced, while oil and gas can be produced at low or high prices. This means that as long as oil and gas are still in demand, consumers are heavily impacted by price fluctuations.

2014: The year of storage for renewables

But 2014 was also the year that energy storage made a breakthrough. We saw the first real commercial and industrial-scale energy storage system come on line in South Australia. This provided a storage solution for renewable energy and helped the state manage its energy supply and demand. The Tesla battery storage system in South Australia should also not be overlooked, even though it has since been overtaken by other projects. Tesla’s battery storage system was developed in collaboration with the South Australian government and state-owned electricity company. On the other side of the world, the U.S. state of Massachusetts announced it would be building a large-scale energy storage system. This would reduce the reliance of the state on natural gas. At the same time, the state was expanding its renewable energy capacity through solar and wind.

U.S. Shale Gas: A game changer

Even more important was the shale gas revolution in the U.S. This has reduced the U.S. gas prices, but also made it one of the world’s largest exporters of liquefied natural gas. The growth of LNG as a fuel has also been one of the biggest energy stories of the decade. This has happened at the same time as we’ve seen the acceleration of renewable energies. LNG has provided a bridge fuel to allow a transition while renewables have been on their way. These developments have given the world a little bit of time to deal with the climate change challenge. But that time is very short. While gas is the cleanest fossil fuel, it is still a fossil fuel. Therefore, if we want to meet the goals of the Paris climate agreement, the world cannot continue to rely on gas.

Russia’s role in the world’s supply of oil and gas

Russia is a global energy superpower, with the world’s largest proven oil and gas reserves. The country has been an important exporter of oil and gas to the western world since the 1960s. But since the 1990s, Russia has also been an important player in the Asian energy market. This has been especially true for China, where Russia has been the major supplier of oil and gas for decades. During the 2000s, Russia and the EU were negotiating a major gas pipeline project. The goal was for Russia to supply gas to the EU through this pipeline. The project was supposed to be completed in 2010, but due to political reasons, the project was pushed back to 2020. The Russia-Ukraine war has put a big question mark on Europe’s supply of gas from Russia. A lot of the EU’s gas has been flowing through Ukraine. But the two sides have been fighting a war since 2014. This means that the EU has had to look for other ways to get gas to its energy markets. The EU has increased its imports of gas from other sources. Meanwhile, the EU and Russia have been in a tug-of-war over the future of the Russian-Ukrainian gas relationship.

Conclusion

The Russia-Ukraine war is a reminder that the world is still very dependent on oil and gas for energy. This has caused uncertainty in the energy market, and prices have fallen as a result. The world is still struggling to find an alternative to fossil fuels, even though we need to end our reliance on oil and gas as soon as possible.

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