With high energy prices, Asian countries begin to face crises

At the Sri Lanka , people line up for miles to fill a fuel tank. In Bangladesh, stores close at 8pm. to conserve energy. At India and in Pakistan, power outages force schools and businesses to close and residents to be left without air conditioning amid deadly heat waves in which temperatures reach 37ºC.

These are just some of the more compelling scenes taking place in the Asia-Pacific region, where several countries are facing their worst energy crisis in years – and dealing with growing discontent and instability caused by rising cost of living.

In Sri Lanka and Pakistan , the feeling of crisis is palpable. Public anger has already prompted a wave of ministers to resign in Colombo and contributed to the downfall of Imran Khan as prime minister in Islamabad, the Pakistani capital.

However, many suspect that the political reckoning is just beginning. Both countries were forced to take desperate measures, asking the International Monetary Fund for help (IMF ) and introducing shorter workweeks in an effort to save energy.

On Wednesday (22), Prime Minister Ranil Wickremesinghe said that Sri Lanka’s economy had “completely collapsed”.

Elsewhere in the region, signs of trouble may be less obvious, but they can still have far-reaching consequences. Even in comparatively rich countries such as Australia economic concerns are starting to surface as consumers feel the tightening of utility bills. energy taller.

Wholesale electricity prices in the first quarter of 2022 increased by 141% compared to last year. Households are being urged to reduce usage and on 15 June – for the first time – the Australian government indefinitely suspended the national electricity market in a bid to lower prices, ease pressure on the energy supply chain and prevent blackouts. .

But it is the experience of India, where energy demand has recently reached record highs, that illustrates most clearly why this is a global – not a regional – crisis.

Having suffered widespread outages amid record temperatures, the world’s third-largest carbon emitter announced on May 28 that state-owned Coal India will import coal for the first time since 2015.

What is causing the problem?

While each of these countries faces a unique set of circumstances, they have all been hit by the dual effects of coronavirus pandemic and gives Russian war in Ukraine – two unpredictable events that turned previously secure regional security and supply lines upside down and plunged the world of economic planning into chaos.

At the root, experts say, the problem lies in a growing mismatch between supply and demand.

Over the past two years, the pandemic has kept energy demand extraordinarily low, with global electricity consumption falling more than 3% in the first quarter of 2020 as lockdowns and other restrictions kept workers at home, cars off the road and ships stranded. in the ports.

But now, as nations begin to put the pandemic behind them, demand for fuel is increasing – and sudden competition is pushing coal prices, Petroleum and natural gas to record levels.

Fueling this trend is Russia’s invasion of Ukraine, the world’s third largest oil producer and second largest exporter of crude oil.

With United States and many of their allies sanctioning Russian oil and gas, many countries were left scrambling to find alternative sources – further increasing competition for limited supplies.

“Energy demand has recovered quickly from the coronavirus, and faster than supply,” says Samantha Gross, director of the Energy and Climate Security Initiative at the Brookings Institute.

“So we saw high prices even before Russia invaded Ukraine, but there was really a shock to energy supplies. Various actions taken in response to this are really a challenge for energy supply globally.”

Why Asia?

While the price of energy imports has risen sharply across the world, with international coal prices five times higher than a year ago and natural gas prices up to 10 times higher than in 2021, experts say there is reasons why some developing Asian economies—particularly import-dependent—have been hit hardest.

“If you are a country, especially an emerging economy like Sri Lanka that has to buy these commodities, has to buy oil, has to buy natural gas, this is a real struggle,” said Mark Zandi, chief economist at Moody’s Analytics. .

“You’re paying a lot more for the things you need, but the things you sell haven’t gone up in price. So you’re spending a lot more money trying to buy the same things to keep your economy going.”

Poorer countries that are still developing or newly industrialized are simply less able to compete with richer rivals — and the more they have to import, the bigger the problem, said Antoine Halff, an adjunct senior researcher at the University’s Center for Global Research. from Columbia.

“So Pakistan certainly fits that. I think Sri Lanka also fits in,” he says. “They are suffering the price impact, but they are also suffering the supply impact. They have to pay more for their energy supplies and in some countries like Pakistan they really have a hard time getting energy.”

Canaries in the coal mine

This dynamic underlies the increasingly chaotic scenes unfolding in these countries.

A week ago, Sri Lanka’s energy minister said it was a matter of days before the country ran out of fuel. That grim warning came as queues at gas stations in the capital Colombo stretched for up to three kilometers, and in many cities clashes between police and the public began.

It’s almost as if everyday life itself is closing in. On Monday, public sector offices, public schools and government-selected private schools were closed for at least two weeks.

Public sector workers were instructed to take Fridays off for the next three months – with the suggestion that they use the time to grow their own food.

Pakistan has also had to reduce its workweek – from six to five days – although this could only make the situation worse. Its six-day week, introduced only recently, was supposed to improve productivity and boost the economy.

Instead, hour-long daily power outages have ravaged the country of 220 million for at least a month, and malls and restaurants in Pakistan’s largest city, Karachi, have been told to close early to save fuel.

The country’s energy supply is nearly 5,000 megawatts short of demand — a shortfall that could power between 2 million and 5 million homes by some estimates.

As Information Minister Marriyum Aurangzeb said on June 7, “we are facing a serious crisis”.

And any notion that such problems are a matter only for the poorest and least developed nations is dispelled by the experience of Australia – a country that has one of the world’s highest levels of average global wealth per adult.

Since May, the country has been running without 25% of its coal-based power capacity – partly due to planned maintenance outages, but also because supply disruptions and rising prices have caused unplanned outages.

Like their counterparts in Pakistan and Bangladesh, Australians are now being urged to save, with Energy Minister Chris Bowen recently urging families in New South Wales, which includes Sydney, not to use electricity for two hours every night. .

A bigger problem ahead

The way these nations respond may be causing an even bigger problem than rising prices.

Under public pressure, governments and politicians may be tempted to revert to cheaper, dirtier forms of energy such as coal, regardless of the effect on climate changes .

And there are signs that this may have already begun.

In Australia, the federal government’s Energy Security Council has proposed that all electricity generators, including coal-fired ones, be paid to keep extra capacity on the national grid in a bid to prevent power outages.

And the New South Wales government used emergency powers to redirect coal from the state’s mines to generators locally rather than abroad.

Both measures have been criticized by those who accuse the government of betraying its commitment to the renewable energy .

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