Since its outbreak in late 2019, the COVID-19 pandemic has severely affected the global economy. Indeed, the world has been experiencing various crises exacerbated by the preventive measures and closures that led to a production stoppage, a slow transport of goods, and a significant decrease in raw materials prices, especially oil and gas.
The following are the expected crises that will affect the global economy in the winter of 2021-2022— these are mainly related to the resources crisis and climate change.
1. A Bitterly Cold Winter
Climate change has a significant impact on people’s lives and countries’ economies. For example, there is a correlation between the decrease in temperature and the rise in the cost of daily life; the high demand for heating resources (oil, gas, and coal) necessarily increases their prices, which is also reflected in other goods and services costs.
The U.S. National Snow Center, NASA, and many meteorological centers predict a cold winter and lower temperatures than usual. According to weather agencies, the Polar Vortex, a large region of cold, rotating air that encircles the Earth’s polar regions, is the most important factor in predicting the weather. Although the Arctic air is well contained, the belt may become weak, causing the air to flow, which will lead to a rapid and extreme drop in temperature. As expected, the continents most affected by the polar vortex’s disruption are Asia, Europe, and North America.
Moreover, NASA has predicted cold weather in several regions of the world, especially in the northern hemisphere. After an expedition to the North Pole, The NASA mission confirmed that a major disturbance in the polar vortex is almost inevitable this winter.
2. A Rise in the Energy Resources’ Prices
The decline in oil and gas prices during the outbreak of the Corona pandemic prompted the major oil-producing countries, the OPEC+ alliance, led by Saudi Arabia and Russia, to hold a monthly meeting at the level of oil ministers to discuss measures to maintain the stability of the global oil market. Those measures included the reduction of production in proportion to the global economic recession to maintain the oil barrel prices from collapsing.
With the majority of world countries lifting the preventive measures and the OPEC+ alliance maintaining the policy of reducing production and the gradual increase in it, the prices of a barrel of oil rose in the fourth quarter of 2021, reaching 80 dollars per barrel, after it was stable between 60-65 dollars.
In a related context, the natural gas prices recorded $34 per million British thermal units at the beginning of the outbreak of the Corona pandemic. Now, however, gas prices have risen nearly 500% due to the following main reasons:
- The predictions of cold winter that will affect consumers who use it for heating, factories, companies, and electricity production
- The low storage levels in European countries resulted from a decrease in Russian supplies and the interruption of one of the pipelines from Algeria through Moroccan territory
- The recovery of global economies from the Corona pandemic that led to increased gas demand
- The dependence of many countries on natural gas as an environmentally friendly fuel because it emits less carbon dioxide than oil and coal
- The increased demand for electricity
3. High Sea Freight Costs
There are many factors that contribute to the high prices for international shipping, such as piracy, security tensions, and political conflicts between countries that can affect the operation of ships.
During the Corona pandemic, shipping costs have increased worldwide due to the container crisis, the decreased movement of global supply chains, and the strikes that affected international ports, especially in China and America. To illustrate, the majority of the Chinese shipping containers remained in the U.S during the pandemic. With the global demand recovery, a crisis emerged as those containers were not available in China when needed, which added more expense to the shipping prices.
The points discussed above portend an increase in prices of all commodities and living costs in many countries.
Obviously, the leading nations of the OPEC+ alliance (Saudi Arabia, Russia, and Qatar) will get huge financial revenues from the energy resources they produce.
In response to the rising demand for natural gas, many countries, especially Europeans, may reconsider producing coal to operate their power plants to cover gas shortages.