The energy crisis we are experiencing is proving to be deeper and more enduring than at first sight, according to Helen Thompson, Professor of Political Economy at Cambridge University.
The renowned economist gave a pessimistic speech at the Alfi (Association of the Luxembourg Fund Industry )London Conference, the annual forum for the fund industry in Luxembourg and the City, on 12 October. Regulatory news, the international context, Brexit – in addition to the usual or recurring themes, Thompson's analysis of the current energy crisis did not fail to arouse the concern of the investors of all kinds present in person or online at the conference.
"I believe that the energy crisis facing the world is independent of climate change and the ecological transition", Thompson said in her opening remarks. As the title of her presentation – "The Structural Energy Crisis" – suggests, the economist goes back much further than the war in Ukraine to explain the explosion in oil prices. Firstly, because the demand for fossil fuels is not decreasing. "Fossil fuel energy is still a must for an indefinite period", says Thompson, citing a graph showing that oil, gas and coal consumption has grown steadily since 1990, while the growth in consumption of solar, wind, nuclear, hydro and biomass energy has been flat. "Low-carbon energy has added to fossil fuel energy, not replaced it", she says.
On the other hand, global oil production is growing slowly. It had been stagnant since 2005 before increasing slightly in the 2010s, "only because shale oil production in the US took off in 2010", Thompson says. "When you look at production by country, the US was the only country to increase production in the 2010s. They had high hopes in 2000 that Iraq would become a top producer, on a par with Saudi Arabia and Russia, and the Iraqi government promised 12 million barrels a day by the end of the decade. But it has never exceeded 5 million barrels a day and has been declining since 2018." The US was also counting on more production from Iran, but has been hampered by the impossibility of warming relations with Iran's leaders.
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