System Shock Ahead: IEA Chief 'Warns of Worst Energy Crisis in 50 Years'--But It Will Likely Be Worse

Manwhile, the EU Commission put out a suicide note by announcing a ban on Russian hydrocarbon energy: it's sheer stupidity, which will cause major disruptions in the weeks and months ahead

A few days ago, I saw a quite interesting item over at the Norwegian state broadcaster NRK’s website. Entitled ‘Fears of Travel Chaos in Summer’, two intrepid journos are somewhat dismayed at the prospect of ‘ruined summer holidays’.

By way of an introduction, let it be noted that Norwegian state officials issuing passports are currently swamped by applications. Apparently, a sizable chunk of Norwegians had postponed getting a new passport due to the quite impossible circumstances of international travel in these past two years, to say nothing about the active discouragement from their government.

The rest of the piece is quite stupid: it revolves around a retiree, Mr. Nils Opsahl, who’s previously frequent trips to his vacation house in southern France have been quite frequently affected by SAS cancelling flights on short notice. How many flights are we talking about? Well, some 5%, according to SAS, which means about 4,000 flights—alone, by one comparatively small airline (my emphasis):

‘The vast majority of travelers will not notice this in any other way than that they will be rebooked to a plane within a few hours or the same day’, says spokesman of SAS, John Eckhoff.

It is not only SAS that is expecting trouble this summer. Lately, several airports have experienced chaos due to staff shortages. This is what, in turn, leads to cancellations and deferrals.

Hmmmm, I wonder why there’s staff shortages. Could it be the same reason that hospitals and health care providers are experiencing staff shortages? (There’s probably no single, overarching reason, but I suspect that sick leave, often on short notice, exacerbates this particular problem.)

Also, how bad is that problem in terms of prevalence and impacts?

Here’s what that NRK piece is telling its readers about these issues (my emphases):

Flight analyst at Winair, Hans Jørgen Elnæs, told NRK that seven out of ten airports in Europe expect delays this summer: ‘I think we have to reckon with the fact that very many people will get the impression that there are many more people at the airports than there used to’, he says.

‘The cancellations are a consequence of the pandemic’, says Elnæs. During the pandemic, around 5,000 people were laid off by SAS—that is, about 40% of the work force. These were employees in several functions, both ground and air staff.

‘In addition, several companies have not been able to deliver the aircraft they are supposed to have, and then they have ended up in a situation where they lack aircraft and crew to carry out the program they have planned’, says Elnæs…

This also applies, among other things, to those who work in security control and with baggage handling: many never returned to their old jobs: ‘Thus, new staff must be trained, and they must also pass security clearance. This takes time, and there are simply not enough people working right now’, says Elnæs.

Guess what, this is ‘experts’ informing you that cause (lockdowns) and effect (problems in complex systems) aren’t related. I suppose it’s time to abolish the expert class altogether, for what did they get right in these past 2+ years?

How do Norwegians ‘cope’ with this situation? According to Statistics Norway, the first quarter of 2022 saw Norwegians return to the pre-pandemic Wanderlust, at least in terms of domestic travel. International trips, however, while virtually non-existent last year (see the graph below, taken from the Statistics Norway piece), are slowly creeping upwards, but they haven’t reached pre-Covid levels: I doubt they will.

Translation: ‘Fig. 2: int’l travl, 1Q 2022 (in millions of trips), by Statistics Norway.

You may also venture over to Naked Capitalism once more to read a piece by Nick Corbishly on this. Appropriately entitled ‘Blame Game Begins As Chaos Reigns at Airports in UK (and Other Parts of Europe), here’s a couple of lines:

Neither airports nor airlines in the UK have restored enough capacity into their operations to handle the predictable surge in passenger numbers as the skies reopen…

This is the busiest weekend of the year so far for UK airports and the chaos is expected to worsen in the coming days. Things have gotten so bad that passengers are now being urged to take just one carry-on bag to help airlines cut down the time spent checking people in.

‘It is one less thing to worry about’, said Andy Prendergast, national secretary of GMB union. ‘If people can check in online and do not take bags, that limits the disruption. It’s not a magic bullet but it does reduce the chance of there being problems.’

Problems abound, due to additional ‘complications’, such as mass layoffs (45,000 jobs in the UK alone), compounded by the ending of government subsidies: ‘Since the skies have reopened airlines have struggled to recruit enough new workers to fill the gaps. Drawn out employee security checks, which can take as long as three months, are not helping matters. Both the airlines and airports have turned to outsourcing firms to tackle the shortages, with predictably dire results.’ Shall we talk more about this kind of management by the experts?

Bottom line here (my emphases):

The bad news for air travellers is that flight delays and cancellations are likely to be an ongoing feature of the travel experience this summer, as passenger traffic continues to rise amid persistent labor shortages. Air Council International—Europe’s trade body for airports—has warned that delays are inevitable at two-thirds of European airports this summer.

So, what else could go wrong?

IEA Chief ‘Warns of Worst Energy Crisis in 50 Years’

He should have said ‘ever’, as another NRK piece explained two days ago (all emphases mine):

Today’s energy crisis is far worse than the oil shocks of the 1970s, and will last longer. Europe may experience fuel rationing, warns the International Energy Agency.

Originally posted as an interview over at Der Spiegel (paywalled), Fatih Birol, long-time chairman of the International Energy Agency (IEA), is introduced abusing ‘Russia’ as the go-to bogeyman of this ill-conceived morality play:

Russia’s war causes shortages of oil and gas.

Shall we fact-check Mr. Birol?—What renders oil and gas in short supply isn’t ‘Russia’, but it’s Western sanctions, or, as Yves Smith put it, ‘the EU Shoots Itself in the Foot’ (or ‘a bit higher’, as Thomas Röper suggested).

For a succinct commentary on this, I’d like to recommend Chris Martenson’s recent summary. If you live in Europe, please read this and act accordingly.

Yet, the problem isn’t the embargo on Russian oil (and gas) alone: according to the IEA’s Mr. Birol, ‘there can also be rationing of fuel in Europe this summer’.

Most people may know that Norway is a quite affluent producer of hydrocarbon energy, thanks to large offshore fields of (black and gaseous) gold. Yet, at the same time, most people are blissfully unaware that you cannot just take a barrel of oil and fill it into your car’s tank. It takes numerous steps to ‘refine’ crude oil into the wide variety of products we all thoughtlessly consume every day. Here’s a few lines from the NRK piece to drive this home:

Here in Norway, we are completely dependent on imports of refined oil products, such as gasoline and diesel. Norway imports 80% of all the diesel used during a normal year, and around 75% of all gasoline, according to Equinor.

Sky-high prices for fossil fuels, such as natural gas and diesel fuel, have a direct effect on food prices, among other things.

‘We had two energy crises in the mid-1970s and a few years after that. But back then, it was about oil. Now we have an oil crisis, a gas crisis, and an electricity crisis at the same time’, says Fatih Birol.

If you deem this bad, I’m sorry to report to you that it will get (much) worse:

Russia was the lynchpin of the global energy system, until the country attacked Ukraine. The country has been the world’s largest oil exporter, the world’s largest gas exporter, and a leading supplier of coal.

Europe is now trying to free itself from dependence on Russian energy, a particularly demanding task, especially when it comes to pipeline gas. Since 2004, the IEA has warned the German government against becoming too dependent on Russian gas. Former US President Donald Trump has also warned Germany that the country has become too dependent on Russian energy.

‘This energy crisis is much bigger than the oil crises in the 1970s and 1980s, and it will probably last longer’, says Birol.

As a public service, here’s most of the remainder of this piece:

The IEA chief warns that next winter will be tough for Europe, due to its dependence on Russian gas, and it will likely lead to energy rationing.

Both people and industry are completely dependent on gas, but there may be shortages of refined fuels as early as this summer, predicts the IEA manager.

‘Oil markets may be very tight this summer. When the holiday high season commences in Europe and the USA, the demand for fuel will go through the roof. Then diesel, gasoline, and aviation fuel may be in short supply, especially in Europe’, says Birol.

In summer 2014, oil prices plummeted after being above US$ 100 for several years. Many investments in the oil industry were put on hold, with a number of key players, including energy producers such as Equinor [Norway’s state-owned oil and gas company], Aker, and Saudi Aramco, warning repeatedly that the consequences of underinvestment will be high prices.

Speaking for Equinor, Magnus Frantzen Eidsvold informs NRK that most of the fuel we use here in Norway is imported from other countries:

‘In a typical year, the Mongstad refinery produces 2m cubic meters of diesel. Half of the production is exported, and the rest goes to the Norwegian market. In a normal year, Mongstad produces about 1/5 of diesel consumption in Norway’, he says. In other words: 80% of the diesel used in Norway is imported.

‘At the same time, Mongstad produces 5m cubic meters of gasoline, the vast majority of which is exported, and a small proportion, corresponding to 1/4 of domestic gasoline consumption’, he says.

Equinor’s spokesperson doesn’t have an opinion on the IEA chief’s comments that there may be rationing: ‘What we can do as a company is to maintain our production as a reliable and safe producer and supplier’, says Eidsvold. The second refinery in Norway, at Slagentangen in Vestfold, was closed last year due to what was then overcapacity.

The consequence will likely be queues at gas stations.

Please check out Chris Martenson’s piece if you haven’t done so: he provides a quite helpful primer into how refining crude oil works, including the problems associated, or deriving, from the current predicament.

Bottom Lines

Keep in mind that Norway’s troubles aren’t special or unique in any way or form.

Hence, prepare, prepare, prepare. Better start a year early rather than a day too late.

You may wish to stock up on certain durable items, such as dried beans, lentils, and the like.

Keep in mind that, with potential energy rationing looming, cooking times may be limited during the day: prepare meals that last long(er), may be eaten cold as well, and start doing exercises (such as, e.g., walks) to keep active and warm during the coming autumn and winter (it takes time to build a habit).

If you have kids, make sure you get a couple of ‘offline’ activities ready, such as puzzles, board and card games, and stock up on drawing materials.

Check if there’s an option for heating in your home that doesn’t require oil, gas, or electricity. If so, stock up now as firewood and the like may similarly be affected by energy shocks.

And, above everything, try to remain as calm and clear-headed as possible.

Good luck!