Protests over fuel shortages are unfolding around the world — in Sri Lanka, Ghana, Peru, Ecuador and elsewhere — over high gas prices. We look at the impact of rising fuel costs on countries in the Global South with Antoine Halff, former chief oil analyst at the International Energy Agency, now at the Center on Global Energy Policy at Columbia University. He contextualizes the fuel shortage as part of a greater global energy crisis created in part by dependency of nations like Sri Lanka on imports and the imbalance in supply and demand resulting from COVID-19 and the Russian invasion of Ukraine.
AMY GOODMAN: As we turn to put this in a broader context in the Global South, amidst the protests in Sri Lanka, there have also been widespread demonstrations in Ghana, in Peru, in Ecuador and other countries over high gas prices.
For more on the impact of these rising fuel prices on countries in the Global South, where the impacts have been especially severe amidst the war in Ukraine and the COVID-19 pandemic, we’re joined by Antoine Halff. He is the former chief oil analyst at the International Energy Agency, an adjunct senior research scholar at the Center on Global Energy Policy at Columbia University.
Antoine Halff, welcome to Democracy Now!
ANTOINE HALFF: Thank you, Amy.
AMY GOODMAN: So, if you can talk about Sri Lanka, the example of Sri Lanka, and how it compares to what’s happening in the rest of the Global South?
ANTOINE HALFF: Yeah. Well, Sri Lanka has its own problems, linked to the nature of its economy and the shortfall in tourism revenue they had to face with COVID and so on. But they are also part of a broader situation, which is the increase in energy prices over the last few months, which has perhaps accelerated since the invasion of Ukraine. Sri Lanka is entirely dependent on its oil supply on imports, as are other countries in South Asia — Bangladesh, Pakistan, India — to various degrees. And it now has to — you know, it has less money to pay for higher-cost, high-priced energy, so hence a shortage.
This is not a unique situation. Again, we see pressures in Pakistan. We see pressures in all the countries you have mentioned, having to fork out a lot more for their energy supplies. But it’s particularly acute in Sri Lanka, partly because they are about 100% dependent on oil imports, and also because of their own underlying issues.
NERMEEN SHAIKH: And, Antoine, just to give a sense of the scale of the increase of these prices, international coal prices have reportedly risen five times since last year, while natural gas prices have gone up 10 times more than what they were last year. So, if you could respond to — well, explain what you think might reduce the prices. There are those who say that it’s only a global recession that would bring the prices of fuel down. And if that is not to occur, if fuel prices are not to go down, how are these countries who are so dependent on fuel and gas imports supposed to cope?
ANTOINE HALFF: Yeah. Well, it’s tough. So, what’s very unique about this situation is that it’s a complete energy crisis, as opposed to earlier major oil crises in the 1970s. The first oil strike of 1973, the Iranian Revolution in 1979, more recent events were more focused on the oil market. Today we have concerns about oil, about gas, about coal, as you said. It’s really across the board, but with differences depending on which fuel you look at.
So, in oil, there’s a tightness that’s been building over the last few years because we had a shortfall of investment and capacity that has lasted — you know, started around the first price collapse of 2014, then we had a second price collapse at the time of the first wave of COVID, that has really discouraged investment. The transition to a cleaner energy mix, the energy transition, also has discouraged a lot of investment in the upstream, so we have not had the kind of reinvestment in production capacity that you would normally have. And at the same time, demand was decreased because of COVID, but now it’s coming back with a vengeance. So there’s an imbalance, or there was an imbalance, and we had a very steady tightening of the supply-demand balances over the last year and a big drop in global inventories throughout 2021.
Ironically, since the start of the invasion of Ukraine, inventories on the global stage have started to bounce back. They’re now significantly higher than they were before February 24th, partly because the sanctions against Russia are not really reining in Russian supplies. Supplies are not going where they used to go — Europe, in particular, the U.S., to some extent. They’re going more to Asia. But they haven’t been really reduced dramatically, at least not yet. But they’re going elsewhere. More recently, we’re seeing a little bit of a drop in inventories again, because one factor that helped rebuild inventories over the last few months was also COVID in China and the lockdown of Shanghai and other cities. As Shanghai comes out of confinement, demand rebounds a bit there.
So, we have a structural crisis — structural and cyclical crisis in the oil market, which is not going to be resolved anytime soon. It’s not going to get worse. There’s many forecasts out there saying we’re going to hit $200, $300 a barrel of oil. That’s not going to happen. We’re not going to go so high. But we’ll probably stay for an extended period between $90 and $130 a barrel, which is historically high.
Now, if you turn to natural gas, it’s a completely different story, because gas is not at all as flexible as oil. So, when gas exports from Russia to Europe go down, they cannot easily be redirected elsewhere, and Europe cannot easily replace those imports with other supplies. So there’s a dramatic tightening of gas supplies, which is going to get a lot worse over the next few months and for which there’s no quick solution.
But it’s not affecting Sri Lanka per se directly, because Sri Lanka is not an importer of natural gas, of LNG. It was planning to. It had announced recently plans to build LNG capacity, to shift some of its electricity generation from coal to gas to be cleaner. Now those plans are called into question. It looks unlikely that this is going to happen over the next — the foreseeable future. It might be on hold. But it’s not really hitting the Sri Lankan economy directly.
NERMEEN SHAIKH: And, Antoine, finally, if you could explain — you’ve just said that there is a distinction between natural gas and oil. Now, the price of oil, irrespective of where one imports from, whether it’s Russia, the U.S. or Saudi Arabia, the price of oil is set on the global market. So, could you explain how that impacts the ways in which countries can —
ANTOINE HALFF: Yeah.
NERMEEN SHAIKH: — import oil, even as prices vary, and also whether that’s true of natural gas?
ANTOINE HALFF: Yeah, sure. Oil is a global commodity. Oil is fungible. It’s easy to transport. That’s why it’s been so successful as a fuel. That’s one of the reasons. So, oil gets traded internationally. And all countries import and export oil, almost all of them. So it’s really a global market with a price that’s set internationally on a planet-wide market.
Gas is a bit different. It’s much more difficult to transport. Historically, it was transported only by pipeline. Over the last decade, we’ve seen a very sharp increase in the share of liquefied natural gas in the gas market, a gas that’s liquefied at very low temperature and then transported in liquid form on ships, which is much more flexible, and then regasified in the consumer countries at the arrival point. But gas is still a much more fragmented market, more difficult to transport, and therefore we see more differentiated markets — an Asian market, a European market, a U.S. American market, with different prices. The prices have tended to converge as the share of energy has increased, but still it’s differentiated.
Another factor in oil, by the way, is the tightness in refining capacity. Many refineries have closed down in the last few years, and that tendency has accelerated with COVID. So we now have a world that’s short of refining capacity, except for China, which has a lot of refining capacity, a variable, is sitting on large inventories of crude, but at the moment is not really choosing to help the international market and export the products that it is not consuming at home.
AMY GOODMAN: Well, Antoine Halff, we want to thank you for being with us, former chief oil analyst at International Energy Agency, now with the Center on Global Energy Policy at Columbia University, speaking to us from Paris, France.
Next up, we go to Aziz Rana, Cornell University professor, wrote a major piece in Dissent magazine called “Left Internationalism in the Heart of Empire.” We’ll speak with Aziz Rana and with Darryl Li, who responds. Stay with us.
AMY GOODMAN: “Ceylonkaar” by Arivu and The Ambassa Band for the Sri Lankan protesters.