How war in Ukraine continues to influence global energy, politics
Friday March 03 2023
One year on, the Russia-Ukraine war has significantly altered global energy and geopolitical dynamics.
Carbon reduction ambitions have been significantly modified to respond to energy supply disruptions caused by sanctions on Russian oil and gas supply chains.
Climate lobbies appear to have made a tactical retreat as the world increased oil and gas production to ensure availability and market stability to check energy inflation.
When Russia invaded Ukraine a year ago, the world was still recovering from Covid-19 economic disruptions, with the two factors continuing to put pressure on global oil and gas demands and supplies.
When Russia attacked Ukraine, oil prices suddenly spiked from $80s to above $100 but soon retreated to $80s which is where we are one year later, an indication of demand lagging supply.
Oil and gas supply chains have significantly altered with more Russian supplies heading to Asia, as the US and the Middle East fill supply voids in Europe.
Further, all types of “tricks” in oil export logistics are being employed by traders to beat the EU/USA sanctions against Russia.
In the past year, oil-producing companies have made excessive profits, encouraging them to selectively resume oil production investments in low-cost and low-risk basins.
Energy transition has been the biggest winner in the past year, with investments stepped up in the wind and solar generation, and transport electrification.
Green hydrogen technologies and investments have also gone up to position hydrogen as an alternative decarbonisation and energy security fuel.
Food insecurity created by the disruption of grain supplies from Ukraine continues to exert pressure on food inflation around the world, especially in food-insecure developing countries like Kenya, where persistent droughts have multiplied food scarcity and inflation.
The war in Ukraine has prompted many countries to re-engineer food security policies and programmes to reduce future vulnerabilities.
For those who have continued to watch the war, it has been quite a shocking spectacle of how civilisations and humanity can suddenly degenerate as humans turn against each other, prompted mostly by runaway power politics.
After one year, the war is taking a frightening direction, with the dangers of escalation into regional or even global conflicts as war alliances emerge.
The world is already polarised, with nations declaring their stand on the Ukrainian crisis — a clear onset of a global “cold war”.
Specifically, how China plays its cards on the war could influence the intensity and duration of the war.