May 23, 2022: The current oil crisis is not like the previous ones, and consumers will have to bear its brunt even as they grapple with increasing inflation, Angela Wilkinson from the World Energy Council told CNBC.
“I think this is a first global energy shock; this is not the same as the 1970s oil shock crisis. This is a consumer-driven crisis, and the adjustments will be huge,” Wilkinson, secretary-general at the organization, told CNBC.
The spike in oil prices came after major oil producer Russia invaded Ukraine in late February, which triggered significant global supply chain disruptions in the energy sector as Western countries are slapping heavy sanctions on Moscow for the unprovoked war.
The European Union has proposed a gradual ban on Russian oil, putting more pressure on energy prices.
On Friday, the price of international benchmark Brent crude futures has increased over 42% since the start of the year. It’s previously traded at around $111 per barrel, far higher than levels less than $80 seen early this year.
In 1973, Middle Eastern oil producers halted supply from the U.S. and other Western nations after they assisted Israel in the Arab-Israeli war that year. The Iran revolution from 1978-to 1979, which led to the ousting of the Shah of Iran, also triggered one more energy shock.
“If you look at the price of refined products in many parts of the world, they’re unaffordable for many of the bottom half of societies,” Wilkinson warned. “We’re going to have to see some form of a massive reallocation of money coming out of this crisis. Consumers are hurting.”
Officially, official data this week showed that inflation in the U.K. soared to a 40-year high in April due in part to spiraling energy prices. Similar prices have spiked in the U.S., where consumer inflation remained at almost 40-year highs in April.
“Now we’ve got this rolling series of energy crises, Covid, climate, conflict. Just six months ago, we were talking about climate security. A year ago, we talked about the Covid crisis and recovery,” Wilkinson said. And now, we’ve got cost of the living crisis being triggered in many countries.”
“The biggest challenge will be this new context of affordability and energy justice,” she added. “It’s a big uncertainty, and it’s going to require policy innovation, but it’s also going to require a new approach to international cooperation.”
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