The Big Questions Raised By The Energy Market Shortage

This Curious Minds digest is based around a prominent topic in the news: “the first energy squeeze of the green era”. Data from The Economist shows in September 2020 in Europe, it cost 119 Euros to buy enough gas to heat the average home for a year. Today it costs 738 Euros and stocks are scarce.

If you are looking to study a scientific or social science degree (e.g. Geography, Economics, Politics etc.), it is crucial to examine current affairs articles and topics in the news. You may want to talk about the interesting questions raised by these topics in your personal statement. If applying to Oxbridge, you may also be asked your opinions on current pressing topics in your interview.

This digest will pose a range of questions around the energy market shortage, and will start you thinking about the potential causes and implications.

PART A- The Causes

Factors to think about:

• Climate

  • A cold European Spring and a hot Asian Summer boosted energy demand

• Industrial production

  • Rebounding industrial production has lifted the global appetite for liquefied natural gas (LNG)

• Supply chains

  • Russia has been piping less gas into European stockpiles (may be due to political decisions, as well as disruptions e.g. the fire in a processing plant in Siberia)

• Lack of alternative energy sources

  • Has gas been plugging gaps in other energy sources? e.g. there was a reduction in wind power in Europe this summer, while droughts interfered with hydropower

PART B: The Knock-On Effects

Example points to think about:

• High prices could ration limited supply, but will it curb demand?

• Would prices have to be even higher to curb demand?

• Can you explain your thought process / the different scenarios diagrammatically?

Part C: The Short & Long Term Implications

Try to brainstorm an answer to the multi-fold question above:

1. Think about short and longer term challenges

   • In the short term, could subsidies work, or caps on energy prices?

   • In the long term, how do we smooth out volatility as the switch to renewables continues?

2. What role will the government play? I.e. you could think about:

   • Interventions and subsidies

   • Use of the welfare system to support low income households

   • Supporting small energy suppliers

   • Investing in renewables / reliable alternatives and connecting grids / infrastructure

Further Resource / Reading Suggestions:

• Articles: LNG related articles on “The Conversation”

• Podcast: Europe’s Gas Crisis as Winer Looms - available on “S&P Platts”

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