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The Global Implications of the Asia-Pacific Energy Crisis by Balázs Hompoth

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The Global Implications of the Asia-Pacific Energy Crisis

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Various countries in the Asia-Pacific region are facing their worst energy crisis in years. On top of that, they are grappling with growing discontent over staggering increases in the cost of living. Australia, Sri Lanka, Pakistan, and India are all facing the devastating fallout of unforeseen events. The consequences of their responses are likely to affect the entire globe.

While each of these countries faces a unique set of circumstances, all of them have been hit by the compounding effects of the COVID-19 pandemic and Russia’s war in Ukraine. Both of these events were unforeseeable and have affected the region in a devastating manner.

Root Causes

According to experts, the gist of the problem lies in a growing mismatch between supply and demand. In recent years, the pandemic kept demand for energy low. Global electricity consumption dropped by over 3 per cent in the first 4 months of 2020 as lockdowns and other restrictions kept people at home, vehicles parked and ships in ports.

Now, as nations attempt to move past the pandemic, demand for fuel is spiking and the sudden competition is pushing the prices of fossil fuels such as coal, oil and gas to record highs.

Russia is the world’s third largest oil producer and second largest crude oil exporter

Supercharging the situation is the invasion of Ukraine by Russia. Russia is the world’s third largest oil producer and second largest crude oil exporter. As the entirety of the Western world and many other countries sanction Russian oil and gas in an attempt to decrease Russia’s cash flow, a significant number of countries are trying to find alternatives, driving competition for the scarce supplies even more.

‘Energy demand has rebounded quite quickly from the coronavirus and more quickly than supply,’ said Samantha Gross, director of the Brookings Institute’s Energy Security and Climate Initiative.

‘We saw high prices even before Russia’s invasion, but then there was a real chock to energy supply.’ The actions taken in response to the invasion are a challenge for the global energy supply, especially in the case of countries that have an emerging economy reliant on imported oil and gas, like Sri Lanka.

Sri Lanka

The crisis-hit country is struggling with shortages and its worst economic crisis in decades. In an attempt to save energy and fuel and allow people to grow their own food, Fridays are officially non-work days for state employees, without a cut in pay. This strategy has come under heavy criticism, as most do not have their own land to grow crops and state sector employees typically use public transport.

In April, protests amid the financial and political instability turned violent. The PM and multiple government officials resigned as the government was thrown into disarray. Daily life has devolved into a cycle of chaos and uncertainty since the onset of the crisis.

Snaking mile-long queues for basic supplies like gas and food are the new norm, and many shops have been forced to shut down because they can’t run appliances. Soldiers are often stationed at gas stations to secure the safety of workers and customers alike.

Prime Minister Ranil Wickremesinghe said the Sri Lankan economy had ‘completely collapsed.’

Australia

While the signs of trouble may be less obvious, the consequences could be just as far reaching, even in richer countries like Australia. Economic concerns are beginning to show as consumers are struggling to pay high energy bills.

Electricity prices have increased 141 per cent in just one year

Electricity prices have increased 141 per cent in just one year; households are being urged to cut down on usage. Energy Minister Chris Bowen asked households in New South Wales, which includes Sydney, not to use electricity for two hours only each evening.

The government has also suspended the national electricity market to bring prices down, lessen the pressure on the energy supply chain and prevent blackouts.

In response to the energy crisis, the Energy Security Board has proposed more funding for coal and gas generators for buffer supply as ‘back-up’ to renewables.

Pakistan

Similarly to Sri Lanka, Pakistan also has had to reduce its working week for government employees–back 5 days from 6– although this may in fact make the situation worse. The 6-day workweek had been recently introduced in April to boost productivity, but the shortage in energy makes it impossible to fulfill the bid. The energy supply is 5000 megawatts below demand, an amount that could power millions of homes.

‘We are facing a severe crisis,’ said Information Minister Marriyum Aurangzeb. In line with other countries in the region, Pakistan has also expanded lignite-based energy production.

India

According to the independent Centre for Research on Energy and Clean Air (CREA), another power crisis is about to hit India due to low coal inventories. The previous outage was also attributed to coal-related issues, more specifically to the transportation and management of coal, rather than the lack of supply.

‘Coal power plants are in no position to address even a minor spike in the power demand,’ CREA said in its latest report.

Similarly to Australia, India, the world’s third largest carbon emitter, announced that it would boost its reliance on coal and import coal for the first time in seven years. India already relies on coal for 70 per cent of its energy generation. The decision to increase coal imports is bound to have profound environmental consequences.

Global Implications

Governments may be tempted to return to more polluting but more affordable energy

The manner in which these nations respond to the crisis may lead to an even larger problem than skyrocketing prices. Under public pressure, governments and politicians may be tempted and incentivized to return to more polluting but more affordable energy, such as coal, disregarding the effects on climate change.

A drastic reduction in coal mining and burning is undoubtedly a must to limit the worsening effects of climate change, yet this will prove to be hard to achieve without the major emitters’ commitment to the cause.

Needless to say, Asian countries are far from being the only offenders, as Germany and the US are reverting likewise to less environment-friendly sources of energy amidst the crisis.

Regional energy crises may seem self-contained, but in fact they have profound effects on our globe as countries return to carbon-based energy in a bid to reduce the compounded effects of the COVID-19 pandemic and Russia’s war. Securing energy supply is undoubtedly a priority, but there will be a price in the form of long-lasting global implications to be paid for backsliding on climate action.


Balázs Hompoth is a graduate of Pázmány Péter Catholic University (PPKE). He majored in English and minored in Media and Communications with a special interest in journalism.

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