Energy transition: the world turned upside down?

This 14-page note evaluates short- and medium-term options to alleviate energy shortages, which are now the second largest problem in the world. Despite a lot of posturing, we see ‘new energies’ slowing down in 2022-23. The world is upside down and somehow coal is going to be an unexpected savior.

What happens in an energy shortage? In 2022, energy will absorb the largest share of GDP and consumer expenditures on record. We present the data on pages 2-3 and the challenges thereby created.

Curtailing demand is the only short-term option to alleviate energy shortages. There are three possible mechanisms of demand destruction, described on pages 4-5. There are no good options here, only ‘less bad’ ones.

Increasing energy supplies will be determined by what can actually increase. The largest option is coal, then short-cycle shale, as quantified on pages 6-8.

Doubling down on new energies may paradoxically exacerbate the energy shortages, as many of these technologies have ‘energy paybacks’ over 1-2 years (chart above). We want to do these things in the long-run. But they become harder in the short-run (pages 9-12).

Seven predictions are offered for decision-makers on pages 13-14. These are our best ideas for positioning in the current environment and also putting ‘energy transition’ back on track.

To read more about the options to alleviate energy shortages, please see our article here.

Copyright: Thunder Said Energy, 2019-2023.