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Energy crisis: A threat or an opportunity for climate goals?

Since the beginning of the pandemic the world has gone through many dynamic changes. One of the most significant changes was undoubtedly in the energy sector. Oil futures prices, which went negative in the CME in the early days of the Covid-19 pandemic, were replaced by discourses such as ‘the highest price in recent years’ with normalisation. Russia's invasion of Ukraine has paved the way for a deeper and more complex crisis in the energy sector. Due to mutual sanctions imposed between the European Union and Russia, natural gas prices in Europe hit records high.

The price of oil, which fell to -40.32 dollars at the beginning of the pandemic and caused a shock in financial markets, rose to 130.50 dollars with the impact of the war, European natural gas prices, which averaged 17 euros during the pandemic, peaked at 349.87 euros, and the ‘energy crisis’ became indispensable for news headlines.

What is the current situation?

If we were to answer this question during the crisis, we would probably have given the wrong answer. But, there has been a major pullback in energy prices around the world. The globally rising inflation led central banks to adopt a tight monetary policy, which suppressed the global energy demand. Concerns of recession in financial markets amid rising interest rates caused market players to end their buying positions in oil and natural gas futures markets. The normalisation in oil prices, which hovered at a 10-year high due to the recession concerns forced OPEC+ members to change their policies. OPEC+ decided to cut production to keep prices at the desired level.

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