China embarks on coal, oil wins as energy crisis deepens

October 8 (Reuters) – China ordered miners in Inner Mongolia to increase coal production, and oil prices jumped on Friday as a record rise in gas costs rekindled demand for the most polluting fossil fuels to keep factories open and homes heated.

The rebound in economic activity following the coronavirus restrictions has revealed alarming natural gas supplies, leaving traders, industry leaders and governments to scramble as the northern hemisphere heads towards the winter.

The energy crisis, which has led to fuel shortages and power outages in some countries, has highlighted the difficulty of reducing the global economy’s dependence on fossil fuels as world leaders seek to revive efforts to tackle climate change at talks next month in Glasgow.

In China, where coal production had been reduced to meet climate targets, authorities ordered more than 70 coal mines in Inner Mongolia to increase production by nearly 100 million tonnes or 10%, while the the world’s largest exporter is battling its worst electricity shortages in years. .

Russian company Gazprom, a major supplier of gas to China, allayed fears that a fire at a major gas processing plant could worsen the situation, saying it was able to continue exporting gas to China normally.

India, the second largest consumer of coal after China, also suffers from power outages due to a lack of coal, with more than half of its coal-fired power plants having less than three days of fuel stocks, showed the data of the federal grid operator.

Oil prices rose on Friday, on track for gains of nearly 5% this week as industries switch fuels.

“There are many catalysts for keeping the oil market tight,” said Edward Moya, senior market analyst at brokerage firm OANDA.

Reflecting the gravity of the situation, the United States has not ruled out drawing on its strategic oil reserves, which it usually does only after major supply disruptions such as hurricanes, or continuing a ban on oil exports to bring down the price of crude oil, although there are doubts it is still ready to take such a step.

“The DOE is actively monitoring the supply of the global energy market and will work with our partner agencies to determine if and when action is needed,” said a spokesperson for the Department of Energy.

HOLD THE TENSIONS

Global fuel shortages are another blow to a global economy that has just recovered from the coronavirus pandemic and threatens a costly winter for consumers.

China will allow coal-fired electricity prices to fluctuate by up to 20% from baseline, instead of 10-15% previously, to avoid high energy consumption, the China reported on Friday. public broadcaster CCTV, citing a state meeting. Council or cabinet.

Bangladesh, meanwhile, bought two cargoes of liquefied natural gas (LNG) for delivery in October at record prices, two industry sources said on Friday, as low stocks in Europe heighten competition with Asia for supply.

“It’s really hard to cope with such abnormal prices. At the moment, we have no choice but to buy to keep the economy going,” said an official from Petrobangla, who oversees the LNG supply.

Bangladesh is reviewing the leases of five expiring oil-fired power plants, despite plans to switch from oil to natural gas for power generation.

Even before the current energy crisis erupted, the world was far behind in efforts to avert catastrophic climate change with a United Nations analysis estimating global emissions to be 16% higher in 2030 than they expected. were in 2010 based on current country commitments.

Soaring energy prices are fueling tensions in Europe over the green transition. The richest countries want to keep up the pressure to ditch fossil fuels while the poorest, worried about the cost to the consumer, are wary.

Britain’s energy regulator has warned that energy bills, which have just been hiked, are expected to rise significantly in April due to high wholesale costs that have forced some suppliers to close their doors.

Divisions within the European Union have deepened, with Hungarian Prime Minister Viktor Orban accusing the European Union’s action to tackle climate change to be the root of the current crisis and claiming that Poland and Hungary will present a united front at the next EU summit.

Analysts have said that rising gas prices are the main driver of electricity costs in Europe, while the soaring cost of permits in the EU carbon market has contributed to around a fifth of the increase in electricity prices.

Writing by Elaine Hardcastle; Editing by Carmel Crimmins

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