Oil prices have continued to rise across the world as the United States and OPEC members vie for increased production, risking more problems for consumers in countries ranging from India, from Pakistan, Japan to Germany.

The oil price shock is a setback for global growth, but it is particularly devastating for developing economies where governments do not have the funds to protect people from the resulting inflationary shock. In low-income countries, the situation could be even worse.

“High commodity prices, if sustained, could slow growth in energy-importing countries and exacerbate food insecurity in low-income countries,” a World Bank report said in October.

“High food prices, combined with recent spikes in energy costs, are pushing food price inflation upward in several low-income countries, such as Ethiopia, Zambia and Zimbabwe , as well as in higher income EMDEs, notably Argentina and Turkey, ”the report found.

But there are no visible signs that the Riyadh-led Opec and Moscow will agree with Washington to increase their planned production to ease oil markets in the United States, Europe, Africa and South Asia. .

More recently, even economically well-developed European countries like the UK have faced gas and oil disruptions while countries like India and China have serious difficulties meeting their demands for coal, which all showed signs of a growing global energy crisis linked to fossil fuel shortages. .

All of this is happening as global demand for energy grows, with governments easing pandemic measures and activating workplaces and markets. “This is part of a model where the rapid recovery in energy demand and supply disruptions are causing a price shock,” said Lauri Myllyvirta, chief analyst at the Center for Energy and Energy Research. ‘fresh air. TRT World.

A repeat of the energy crisis of the 1970s?

Myllyvirta believes the “long-term effect” of rising fuel prices and supply shortages will be “similar to the oil crisis of the 1970s – accelerating efforts to move away from fossil fuels.”

The energy crisis of the 1970s had devastating effects on the global economy as Western countries like the United States, Canada, the United Kingdom and other Western European states faced enormous shortages. of oil.

The energy crisis was rooted in the Middle Eastern conflicts involving Israel, the Arab states and later Iran in 1979, leading to disruptions in oil exports from major producers like Riyadh and Tehran to world markets.

The current conundrum has also been partly rooted in the political conflicts between Washington and Moscow. A significant portion of the American and European political class believe that Russia has intentionally cut gas supplies to Western Europe in order to raise prices.

The Biden administration also has serious problems with Riyadh under the de facto leadership of Crown Prince Mohammed Bin Salman, who was accused of killing Jamal Khashoggi, a Saudi dissident journalist, at the kingdom’s consulate in Istanbul in 2018.

Blame game

Rising fuel prices and the growing energy crisis have sparked accusations by the Biden administration against Saudi Arabia and Russia. In the United States, oil prices have risen 60% over the past year, with world prices reaching their highest levels in the past seven years.

“OPEC + does not appear willing to use the capacity and power it currently has at this critical time of global recovery for countries around the world. Our view is that the global recovery should not be jeopardized by a mismatch between supply and demand, ”said a spokesperson for the Biden National Security Council.

But Riyadh believes that Opec is acting “responsibly” by increasing oil production by 400,000 barrels per day, which is too low for the United States to meet growing global demand. Saudi Energy Minister Abdulaziz bin Salman, MBS’s half-brother, appeared to bring together a grand coalition of oil-producing countries from Mexico to the United Arab Emirates to oppose the US demands.

Russia is on the same wavelength with OPEC. As the United States and its allies accuse Moscow of not increasing oil production, Russian Energy Minister Alexander Novak has blamed Covid-19 insecurities for current production levels.

OPEC + sources have also advised Washington, the world’s largest oil producer, to increase production if the United States truly believes more energy is needed to stabilize the global economy.

While a senior US energy official previously suggested that the United States had “tools” like freeing up its strategic oil reserves to lower oil prices, Riyadh and Moscow do not believe that the Washington’s shale industry could rapidly increase production.

Salman also cited that not only the prices of oil but also the prices of other fossil fuels like gas and coal have also increased significantly, saying that there is a widespread energy problem related to other variables.

India and China recently reported severe coal shortages due to rising prices and declining mining activity. “The increase in prices and imports of coal and gas in China is one of the main drivers of the global fossil fuel shortage,” according to Myllyvirta.

Source: TRT World