Global supply chains remain choked.Credit:Bloomberg
Keeping the lights and heaters on and factories operating through increased reliance on fossil fuels will make for uncomfortable conversations at the Glasgow summit. It will provide ammunition for those who highlight the intermittency of renewables in arguing for a more considered transition away from fossil fuels to renewables.
The energy crunch is highlighting some of the near-term structural challenges to energy supply and affordability in the transition.
In the longer term the energy crisis might provide a price signal for more renewables and more and better renewables storage capacity but the politicians in Europe,China,the US (where gasoline prices are at their highest levels in seven years) and elsewhere will be very sensitive to the implications of the soaring prices and rationing of supply on their economies and constituencies.
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Put an increasingly global energy crisis together with the severe supply chain disruption (in the lead up to Christmas,the peak period for demand) and already-elevated inflation rates and the prospect that the recovery from the pandemic will be choked off,the fear that inflation will become entrenched and force interest rates to rise – even as economies slow – looms larger.
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