The present global energy crisis is not fundamentally to do with shortages in the supply of gas, oil or coal. Whilst fossil fuels are a finite resource, a fact which is to be reckoned with in any rational energy plan, the reality here is that there is still a superabundance of such fuels, whether held in reservoirs or yet to be extracted from beneath the earth’s surface.
The current man-made shortages are entirely a consequence of the inability of capitalism to organise production around the needs of society rather than the profits of the few. Capitalist production is very good at producing more capital but quite hopeless at reliably producing the goods actually needed by society.
This is why capitalist society repeatedly confronts us with the spectacle of hunger in the midst of abundance, or in the present case factories grinding to a halt, families struggling to pay rocketing energy bills and homes plunged into the cold and dark though power cuts – whilst, for example, the USA is sitting on a hoard of crude oil near the Gulf of Mexico containing over 600 million barrels of the stuff.
Whilst this hoard is presented as a safety precaution for the US population, it serves primarily as a tool to manipulate energy markets to favour US monopoly capitalism. US energy secretary Jennifer Granholm recently flirted with the possibility of releasing some of this jealously guarded stockpile with a view to bringing down prices. As the US is a consumer as well as a producer of oil, grossly inflated prices are a mixed blessing.
Such loaded hints have a direct effect on febrile market sentiment. When Granholm made her carefully calibrated remarks the effect on the market was abrupt, with US crude futures falling 2.5 percent to below $77 a barrel. Those in possession of such vast reserves are able to manipulate the market to their advantage.
But the US is not alone in playing this game. The Opec group of oil producing countries are sitting on their own hoard, holding out against pleas from the US to turn the taps on full, instead sticking to their own plan to release a more modest 400,000 barrels a day in November.
European energy reservoirs are far less well endowed, and Britain’s gas stocks are the smallest of all. As winter approaches, Britain’s gas reserves amount to 1 percent of the European total reserves – enough to stretch to four or five winter days at most.
Until 2017, Centrica’s Rough storage facility provided 70 percent of Britain’s gas storage capacity, but it was closed down after the government decided to stop subsidising its maintenance costs, preferring to cross its fingers and hope that affordable gas would always be available on the spot market. Now the population is suffering the consequences of this foolish optimism as Ofgem jacks up the price cap and hefty energy bills thud onto the nation’s doormats.
The global energy shortages arose initially from the inability of the market to adjust to the revival of industrial production now that economies stalled during the pandemic lockdowns are playing catch-up. But what is multiplying the gravity of the problem is that, rather than a coordinated international response, what we are seeing is another vicious twist in the cycle of trade war, speculative gambling and bellicose slander against Russia and China.
Trade wars over liquefied natural gas (LNG)
Take the supply of liquefied natural gas (LNG) as an example of how planless market anarchy has turned a temporary supply glitch into a trade war between Europe and Asia from which only monopoly capitalist speculators can benefit.
The price of LNG on the spot market fell to a record low as recently as May 2020 when lockdowns stifled demand. This was aggravated by a gush of fresh supply coming from the USA, Australia and Qatar. With prices so low, producers cut back on production throughout the summer of 2020. But then came a cold spell, which shrank reserves in Europe and Asia and inflated prices on the spot market.
Europe was unable to rebuild its gas stocks over the summer, and the situation was worsened by the fact that coal shortages forced power stations to switch from coal to gas. LNG prices are now hitting all-time record highs as a bidding war develops between Europe and Asia.
An additional cause of LNG and other energy price hikes was the growth in demand from Chinese industry, a fact that is being latched on to by sinophobes, although the reality is that China is being hit hard herself by shortages stemming from exposure to market forces not of her making.
A shortage of coal in China has caused power cuts that have slowed factory production, while a commitment to reduce emissions to meet environmental goals is adding further challenges. Last year, President Xi Jinping announced a target of reaching peak carbon emissions by 2030 and becoming carbon neutral by 2060.
Unlike similar pledges from other industrial countries, this announcement was swiftly followed by practical action, with both national and local plans to reduce coal production being put into place. Given the combination of market shocks and ecological commitments, it is remarkable that the Standard and Poor rating agency only downgraded China’s growth forecast from 8.3 percent to 8 percent.
Attacking Nord Stream 2
When the west is not blaming China for causing shortages by inconveniently expanding production, it is blaming Russia for supposedly ‘manipulating’ the market. In particular, it is alleged that the recently completed Nord Stream 2 pipeline is proof of malign intentions. Russia has been accused of manipulating the market and playing politics, and the US and the European Union have left no stone unturned trying to obstruct the project.
The reality is that it is the west which is playing politics. The new pipeline, built by a consortium that includes five western utility and oil companies, will transport gas straight from Russia to Germany, passing beneath the Baltic. This is a useful addition to the existing pipeline from Russia to Germany via Ukraine, but the Kiev regime fears that opening up a second route will prevent it from using its strategic location to threaten to make trouble for Russia by diverting or blocking the flow of gas to Europe.
Now that the pipeline has finally been built, in the teeth of opposition from Washington and Poland, the pipeline critics are clutching at one last legal straw. In a case dragging through the courts, lawyers are contending that Nord Stream 2 is not exempt from European Union rules that require the owners of pipelines to be different from the suppliers of the gas that flows in them. These rules, amended in 2019 with the Russian venture clearly in mind, would require Gazprom to auction pipeline capacity to third parties.
While this latest legal stunt may further delay operation, it is hard to imagine that the obvious advantages for Germany will not prove decisive in due course.