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Rallying energy commodity prices are expected to drive up primary energy expenditures globally to a record 13 percent of world gross domestic product (GDP), comparable to the energy cost levels in the 1979-80 energy crisis, research consultancy for energy technologies Thunder Said Energy said in a report on Wednesday.
The expected record 13-percent energy expenditure would be three times the average level of 4 percent between 1900 and 2020, and 1.3 times the 2018 levels, the consultancy noted.
Since the beginning of the 20th century, primary energy expenditures have averaged 4 percent of global GDP, rising to 8 percent after the first oil shock, 13 percent after the second oil shock, 10 percent in 2008, and 8-10 percent in 2013-2015, when prices were high.
Source: Thunder Said Energy
The estimate of a record energy expenditure as part of global GDP assumes prices of $250-$300 per ton of coal, $125-$150 per barrel of crude oil, and $40-45/mcf price of global natural gas, Thunder Said Energy noted.
"So this is not an 'oil shock' or a 'gas shock' but an 'everything shock'," Rob West, Analyst & CEO at Thunder Said Energy, wrote in the report.
Crude oil, natural gas, and coal prices had rallied even before Russia's invasion of Ukraine, but the war premium sent earlier this month prices of coal and natural gas to all-time highs, while crude oil prices hit a 2008 high last week of above $130 per barrel.
"Curtailing demand is the only short-term option to alleviate shortages," West said, adding that "There are no good options here, only 'less bad' ones."
Thunder Said Energy, like many other analysts and industry officials, shares the concerns about underinvestment in conventional energy in recent years, especially in light of the fact that fossil fuels still provide around 83 percent of total energy demand globally.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
The only deal Iran would accept is one on its own terms, meaning a lifting of all US sanctions first and no new limitations on its nuclear and ballistic missile programmes. This the United States egged by Israel can’t accept.
That is why a new nuclear deal won’t be signed soon. The Iranian negotiators sense that the United States is in a hurry for a new deal so it can focus all its energies on China and the evolving Ukraine conflict. Therefore, they will drag their feet until they get maximum concessions from the United States.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
So, we are in for everything shock, with energy. Reduced demand is looking like a likely outcome. Folks note that we are underinvested in petroleum in recent years. This could be due to politics around energy and the environment. Or, it could be because petroleum investment underachieved in recent years, compared to all other economic sectors. Investors became disenchanted.
Bringing in the petroleum has become tough and therefore more expensive. This is especially true with unconventional petroleum like diffuse petroleum that is held in oil sands. Undersea oil is also tough oil. And now, we have the premium cost of petroleum world-wide due to conflict. Conflict and petroleum, unluckily, seem to go together like oil on a work shirt.
I find myself cheering geopolitically to reduce oil usage in the U.S. so that we can have extra for Europe.
Reduced fossil fuel demand may be what we increasingly rely on, for a number of reasons. But I will admit that I have enjoyed our ride to-date with fossil fuels.