Without ties, elevators and cars: How the world is coping with the energy crisis

Drive and fly less, go to work without a tie, and better yet, work from home. This is the advice given by authorities in various countries, which have to reduce demand for energy resources due to the largest disruption in the history of their supply. In different countries of the world again recommend to switch to remote work, which reminds of emergency measures in the times of pandemic Covid-19. But now it's a response to the energy shock from the war in Iran.

The Gulf states supplied about 20 percent of the world market with oil and liquefied natural gas, as well as significant amounts of fuel, especially aviation fuel.

After these supplies were cut off because of the war in Iran, oil and gas prices rose in Europe by 60-70%, and diesel and jet fuel prices doubled. But Asia suffered the most, with 83% of LNG and 84% of crude oil passing through the now virtually blocked Strait of Hormuz(the Financial Times citesdata from the U.S. Energy Information Administration for 2024).

Initially, economists feared that the energy shock due to the war in the Middle East would provoke an inflationary shock. But now an additional, if not the main negative consequence is seen as a slowdown in economic growth. In an unfavorable scenario, if the average oil price is $135 per barrel in the second quarter, the world GDP by the second year after the beginning of the crisis will shrink by 0.5% compared to the baseline forecast, estimated the Organization for Economic Cooperation and Development. The negative effect for Europe will be 0.8%, and for the countries of the Asia-Pacific region, members of the OECD, - 0.9%.

"If the global economy is deprived of 10-15% of oil production, it will lead to the introduction of rationing one way or another," Adam Wolff, emerging markets economist at Absolute Strategy Research, told the FT.

What the economists are saying has already been felt by workers at Goto Monster, a popular restaurant in the Philippine capital Manila, says the FT. The restaurant, located in the Makati business district, is usually packed on weekdays, with workers from surrounding offices flocking in for lunch and dinner. But the government of the Philippines, which received 95% of its oil imports from the Gulf, has declared an energy emergency and imposed conservation measures, including a shift to telecommuting. Attendance at Goto Monster is down 30-40%, and those diners who do come in are spending less, restaurant officials say.

After the oil shock, the employment-to-population ratio declines in the first two quarters, then stabilizes, and then begins to fall steadily from Q11. As a result, after five years, the indicator is 0.45 percentage points lower.

To cope with the "biggest energy crisis in history", the International Energy Agency (IEA) has proposed 10 measures to save energy resources, including: switching to remote work (three days a week working from home can reduce the country's car fuel consumption by 2-6%), reducing the speed of cars by 10 km/h, using public transport instead of private cars, avoiding air travel if there are alternatives, switching from gas to electricity when cooking, etc., and so on.

Thailand has gone even further. The government canceled most overseas trips for officials and instructed them to go to work in short-sleeved shirts and without ties (except for official ceremonies) to reduce the need for air conditioning, The Guardian reports. In support of the initiative, live TV news anchors took off their jackets.

In state institutions it is recommended to set the temperature at 26-27 degrees Celsius, so that air conditioners work less intensively. It is also recommended to use elevators less and unite for car trips.

If the crisis worsens, the authorities are ready to consider other measures - closing gas stations and reducing the brightness of billboards after 10 pm.

Also Thailand and Indonesia are increasing the share of biofuels, including those based on palm oil, which can be blended with conventional fuels.

Vietnam has cut the number of overseas flights, shifted civil servants to partially remote work and encouraged companies to do the same.

South Korea has lifted restrictions on coal-fired power generation and announced the postponement of a planned phase-out. Bangladesh, Thailand and the Philippines have started to increase coal-fired generation.

Elmer Carascal, a driver of a jeepney minibus, the main urban public transport in the Philippines, told The Guardian in mid-March that his income had more than halved since the war began. Before the war, diesel cost 52-53 pesos a liter, and by March 18 it was already 79.4 pesos, while passenger numbers had fallen dramatically due to the shift to telecommuting and other austerity measures.

In Europe, diesel doubled in price at stock exchange trading. Although it is much less dependent on oil from the Middle East than Asia (only 13% of EU imports), it buys a lot of fuel from the region. In addition, competition for it has increased sharply, and buyers have to offer higher prices to lure tankers carrying it.

Diesel futures on London's ICE exchange rose in price to $1500 a ton, or more than $200 a barrel, the highest since the 2022 energy crisis. It was around $100 a barrel in late February. In Asia, prices for diesel, which is used in a wide range of industries from trucking to construction equipment, also reached $200 a barrel, according to data compiled by Bloomberg.

In the U.S., the Energy Information Administration says it rose in price at gas stations to $5.4 a gallon (equivalent to $226.8 a barrel), up from $3.5 in January.

Europe is "facing a protracted energy crisis that will last longer than the conflict in the Middle East," warned Dan Jorgensen, European Commissioner for Energy. He urged Europeans to follow the IEA's recommendations and to accelerate the transition to renewable energy sources (RES).

Energy prices will remain at elevated levels for a "very long time", Jorgensen told the FT. The price situation for some "critical" products could "deteriorate further in the coming weeks," he added. Therefore, the EU, he said, is considering "all possible options," including rationing of diesel and jet fuel, as well as additional oil from strategic reserves being brought to the market.

In the long term, however, it is necessary to "turn the tide and become truly energy independent," for which we need to redouble our efforts to switch to green energy, Jorgensen said. He was supported by the Bruegel think tank, which noted that countries that have replaced gas-fired generation with renewables are "less exposed to fossil fuel-related price shocks".

Its experts called increasing electricity generation from non-fossil sources "the only structural approach that would break the link between European electricity prices and fossil fuel prices" and protect the EU from future price shocks.

China boasts a fleet of electric cars roughly equal to the rest of the world, huge and growing oil reserves, diversified oil and gas supplies, and a power grid that is virtually import-independent thanks to a large share of coal and renewables, Reuters notes.

At the end of 2020, Beijing set a goal of increasing the share of electric cars to 20% of total new car sales by 2025. In reality, it has reached 50%. The Finnish Center for Energy and Clean Air Research (CREA) estimates that the amount of oil displaced by electric cars in 2025 was roughly equal to Chinese imports from Saudi Arabia.

"The current situation is very close to what Chinese strategists have been planning for decades," CREA co-founder Lauri Mülluvirta told Reuters. - "This confirms the feasibility of seeking to reduce dependence on offshore fossil fuel supplies.

This article was AI-translated and verified by a human editor