The year 2022 will have marked history in terms of energy. By invading Ukraine, and wanting to use Europe’s dependence on its gas to subjugate it, Vladimir Putin has unleashed an unprecedented global energy crisis.
The 2022 crisis is reminiscent of the two oil crises of the 1970s, which took place following events in the Middle East: the embargo of Arab countries in 1973 and the Iranian Revolution in 1979. These two events caused oil prices to skyrocket. oil, bringing with them a large-scale economic crisis in the early 1980s. The crises of the 1970s were not without consequences, far from it. They convinced the United States to deploy troops to the Middle East to protect the oil sites (they are still there), resolutely launched France into nuclear power and, in Quebec, accelerated the electrification of heating.
The 2022 crisis will not be without consequences either. By blowing up the prices of oil, but also of gas, the coffers of Russia, a major producer of fossil fuels, were able to be filled.
In response, Western countries imposed an embargo on its oil and demanded carriers and insurers located in their countries to impose a ceiling price ($60 per barrel) on oil transported by Russia, marking a first. In the United States, the imposition of sanctions against Russia and its oil has also had some hitherto unseen consequences.
In particular, Washington has made massive use of the barrels of its Strategic Petroleum Reserve in order to calm prices at the pump. Nearly 200 million of these barrels were injected into the market, which constitutes, by far, the most important use of this reserve set up in 1975.
On the gas side, the two main gas pipelines linking Russia and Germany, Nord Stream 1 and 2, have been rendered inoperative due to sabotage actions. Nord Stream 2, just completed at the beginning of 2022, and which would have made the Germans even more dependent on Russia, was never commissioned anyway, a deadweight loss of $11 billion for Moscow.
Faced with this shortfall in Russian gas, and because of their desire to free themselves from their main energy supplier, the Europeans had to react quickly, particularly in anticipation of this winter.
Norway notably came to their rescue thanks to the gas pipelines that connect it to the Old Continent. But the Europeans were mainly able to count on liquefied gas delivered by sea.
The United States have been the big winners of this shift by exporting their gas en masse to Europe. The country has become nothing less than the world’s leading exporter of liquefied natural gas, ahead of Australia and Qatar.
However, the American industry did not export any gas in 2015. This new position of leadership is an unexpected turnaround.
The crisis has also reinforced the will of States to reduce their energy vulnerability. Resolved and determined to reduce its excessive dependence, Europe has adopted a very ambitious plan aimed at accelerating its energy transition (REPower EU). Solar, wind, electrolysers to produce hydrogen, heat pumps, batteries, energy saving projects, everything is on the table to strengthen the continent’s energy security.
Washington has also adopted its Inflation Reduction Act, its most important pro-climate law, including generous tax incentives to accelerate the transition to low-emission energy. This law is expected to substantially reshape the energy landscape in the United States over the next decade.
Real effects in Quebec
The 2022 energy crisis will have had very concrete effects in Quebec.
Outside its territory, in the United States, Hydro-Quebec was able to profit handsomely from the meteoric rise in the price of gas, its main competitor. Its price has indeed exploded, towards the highest peaks in 15 years, due to strong global demand. Hydro-Québec was thus able to sell its electricity on its export markets at a much higher price: 7.6 cents/kilowatt hour in 2022, compared to 4.4 cents/kilowatt hour in 2021, an increase of more than 70%. These higher-priced sales resulted in very significant profit growth for Hydro-Québec compared to last year. Its last quarterly profit, for example, was up 90% from the same period last year. The year 2022 is a pivotal year and should accelerate the energy transition. Proof: according to an analysis by BloombergNEF1, we invested as much money last year in technologies associated with the transition as in fossil fuels. This is a first, heralding a new era in the world of energy.