The Energy Crisis Comes Home: Rising Energy Prices Challenge The Recovery
There’s an energy crisis around the globe. The impact of changes to both raw oil supply, refinement facilities, and delivery of gas, natural gas, and oil have inched energy prices upwards around the country and the globe.What is different about this energy crisis is that it comes at a time when raw material shortages are hampering the transition to renewable energy projects. Even as entire industries rush to adapt wind, solar, geothermal, and energy storage technology to reduce their reliance on fossil fuels, materials like nickel, lithium, and silver have meant that even those willing to invest are hamstrung by supply.
Fuel Prices and Diesel Fuel Prices: The Rise Started with a Fall
In the spring of 2020, oil prices plummeted as the world economy can to an abrupt halt. Supply so drastically outpaced demand that companies were paying to store it, leading to a brief period where some oil stocks were trading at a deficit.In response, production came to a halt, though industry experts at the time were already forecasting a costly lag as demand increased along with broader economic recovery. The result: the prices spikes and shortage we’re experiencing today.For example, gas prices in the US have increased by 55% in a year, now up to a national average price of $3.36, according to AAA.
Natural Gas Future Prices are on the Rise
Natural gas prices, an essential energy source as the nation moves toward the winter months, have more than doubled. In September of 2020, natural gas prices sat at $1.92 per cubic foot. Fast forward 12 months, and the price has reached $5.16.Industry experts believe natural gas prices will hit $5.80/MMBtu in the final months of 2021, possibly peaking in Q1 of 2022 at roughly $5.90. As supply catches up, that price should settle closer to the pre-pandemic price of $4.01.
EV and Renewable Energy Is Ready, But Supply Is Slowing Things Up
These price spikes have rightly encouraged many world leaders and businesses to move more aggressively in the transition to renewable energy. Supply chain issues have plagued what would otherwise have been an ideal time for investment in adopting renewable energy and expanded offerings for electric vehicles.Supply chain issues for raw materials like nickel and aluminum have put the brakes on that move, however. The nickel and lithium required for the lithium-ion batteries that are integral to effective energy storage are in short supply. Combined with the well-publicized microchip shortage, and EVs are especially restricted from growth in the short term.
Long-Term Energy Forecast Remains Unchanged
Despite the supply chain issues, experts believe that the current energy crisis is even more proof of how costly relying on fossil fuels can be for industry, especially as natural disasters made more impactful by climate change wreak havoc on production and refining crude.The bottom line is the bottom line: renewable energy is less expensive and more reliable than fossil fuels, and the transition to sustainable energy will accelerate alongside supply chain improvements and both public and private investment.
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