History seems to be repeating itself unfortunately. The Middle East war that broke out in October 1973 triggered an energy crisis that pushed the world economy, which had grown rapidly for 20 years, into the abyss of stagflation. After nearly half a century, the Ukrainian crisis that broke out in February 2022 further exacerbated the energy crisis, causing severe damage to the global economy, which is struggling to recover from the impact of the epidemic.
The Ukraine crisis led to the energy crisis Before the Ukraine crisis broke out, the energy crisis had already emerged. The economic recovery and extreme weather had led to an increase in energy demand, while the market expectations were dim and the previous investment had shrunk, resulting in insufficient energy supply. Therefore, energy prices have been rising. . The eruption and protracted crisis in Ukraine further exacerbated the energy crisis. After the war broke out, the United States and its allies imposed severe sanctions on Russia, and Russia responded strongly. Sanctions and countermeasures involve many fields, and the energy field has become the focus. The United States and the West have concluded that energy plays an important role in Russia's industry and export pattern, and the limited price and price of energy exports to Russia will inevitably hit Russia's economy and its military strength, and will achieve the expected effect of sanctions. As a result, Europe has begun to significantly reduce energy imports from Russia, banning coal imports in August, banning oil imports by the end of the year, and cutting natural gas imports by two-thirds until they are completely stopped by 2030. Russia believes that, as the world's largest exporter of natural gas and the second largest exporter of oil, Russia plays a pivotal role in the global energy pattern, and Europe, the main ally of the United States, relies heavily on energy imports from Russia, so it believes that reducing energy exports to increase As a "killer weapon", price is bound to achieve obvious countermeasures. This kind of vicious interaction in which one side "does not" and the other side "does not give" directly deteriorates the global energy situation.
Severe inflation due to skyrocketing energy pricesThe direct result of severe sanctions and strong countermeasures around Russian energy is a skyrocketing energy price, and the linkage effect is extremely obvious: whenever new sanctions or countermeasures appear, energy prices in the international market will rise accordingly. For example, in early March 2022 after the first round of sanctions, the prices of crude oil, natural gas and coal in the international market soared to US$130/barrel, 225 Euros/MWh (TTF futures) and US$423/ton respectively. Afterwards, as the game of sanctions and countermeasures intensified, energy prices in the international market were also "rising and rising" and remained high amid fluctuations. The sharp rise in energy prices has become the primary factor increasing global inflationary pressures. The increasing inflationary pressure has become the biggest driver of hindering the global economic recovery, and even pushing the global economy into the abyss of stagflation after a lapse of nearly half a century. In particular, in the euro area, which is at the center of the energy crisis, inflation will reach 9.1% in August 2022 and 10% in September, the highest since 1997. The sharp rise in energy prices is the main culprit leading to the deterioration of inflation. Energy prices in the euro zone rose 38.6% year-on-year in August and 40.8% year-on-year in September.
Serious impediment to global economic recoveryThe global economy will suffer the worst recession since the 1930s in 2020, and 2021 will show the strongest economic recovery since the post-war recession. But by 2022, the energy crisis will seriously hinder the global economic recovery from multiple aspects. First, the energy crisis has led to increased inflationary pressures, and inflation suppression has become the first choice of policy. The world has entered a new round of interest rate hikes with unprecedented intensity. For example, the Fed raised interest rates five times in a row within six months, and the last three times reached 75 basis points, setting a record for short-term intensive interest rate hikes. The ECB raised interest rates by 75 basis points in September, following a 50 basis point hike in July. The United States and Europe have successively raised interest rates sharply, which not only has a serious impact on their own economies, but also has a serious impact on the global economy. Many emerging markets and developing economies have to bear capital outflows, depreciation of local currencies, imported inflation, and increased debt repayment burdens, etc. multiple pressures. Second, rising energy prices and increasing the burden of energy use costs squeeze corporate profit margins, damage investment capacity and expectations, and seriously hinder economic recovery. Thirdly, the energy supply is seriously insufficient, and there is even a "power outage", which has caused some enterprises to suspend production. Finally, the energy crisis has not only led to increasingly tight household income and expenditure, but also caused serious damage to the lives of residents. As winter approaches, more and more European residents are afraid that energy prices will not be able to afford too expensive heating bills, and have to survive in the cold, and even worry that they have to spend Christmas in the dark because they can't turn on Christmas lights.
Accelerate the adjustment of the geoeconomic patternUndoubtedly, the hardest hit by the energy crisis are the countries that are highly dependent on energy imports, especially those countries that are highly dependent on Russia's energy imports, such as Europe, Japan and South Korea. However, energy powers like the United States, Saudi Arabia, and Qatar have gained multiple benefits from the energy crisis. This means that the energy crisis is also accelerating the adjustment of the geo-economic structure to a certain extent. For the latter type of countries, the energy crisis has instead brought about a substantial increase in energy export revenue, continued prosperity of the energy industry, and promoted their economic operation and thus their international economic status. For example, the net income of the US energy giant Exxon Mobil in the second quarter of 2022 increased by 281.7% over the same period last year, setting a record for the highest single-quarter profit. More importantly, the energy crisis has led to a significant increase in the cost of energy use in different countries. Some companies that cannot bear the burden of excessive energy costs are turning to countries with lower energy costs. Observations show that many leading European companies that are in trouble due to the energy crisis are moving to the United States, where energy supply is relatively stable. Some media even said that the United States is "sucking" European manufacturing.
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