The author is a former director general of the Ministry of Energy
October 1973, the world is moving. Energy prices are skyrocketing. Queues are lingering at gas stations, factories around the world are closing their gates in light of a shortage of fuel oil and diesel, inflation is raising its head. The energy crisis of the 1970s was the result of a decision by Arab oil-producing countries to use the natural resource at their disposal as an economic-political weapon in order to increase their influence on the Western world. In the medium and long term, the crisis led to an increase in oil production and especially natural gas in Europe and the United States, to liberation, even if only partially, from total dependence on OPEC countries, as well as changes in consumption habits; From the crisis, but it led to a sharp shift to the use of coal and within about 15 years the Israeli electricity economy would be based on coal as the main fuel and thus at least in the electricity economy Israel was freed from dependence on oil and its distillates.
50 years have passed and the world is once again facing an energy crisis. This time, too, it seems to many that the crisis is the result of a geopolitical event, the war in Ukraine. But a critical look at the data shows otherwise, energy prices, and in particular natural gas prices, began to rise sharply as early as the spring of 2021, long before the first bullet was fired on Ukraine’s soil. The corona and its exit may have deceived the markets but does not explain the depth of the crisis. The thunder of the cannons as well as the corona viruses seem to have for a moment diverted attention from the fact that the world is in the midst of a crisis. The climate crisis, a crisis which many believe threatens the existence of humanity as we know it.
Far-reaching changes
Dealing with the climate crisis requires far-reaching changes in many economies, but it seems that the energy economy is a change of a magnitude that has not occurred since the beginning of the last century, when oil was used as the main fuel. The dimensions of change, however great, do not tell the whole picture. For the first time, the engine driving the revolution is not increasing economic efficiency or achieving economic growth nor guaranteeing available energy, but rather the necessity of reducing the carbon footprint. A necessity that may even be foreign to the prevailing economic conception for many decades, a conception according to which increasing consumption and with it economic growth is the overriding goal of the modern economy. As with revolutions, they cost money, and the stages of transition from one technology to another are often more complex than expected, fraught with difficulties and require non-technical solutions only. When it comes to energy, which is an essential resource for the existence of a modern economy and even beyond that for all human existence, prices are particularly high.
The energy crisis in Europe is still in full swing, next winter is expected to be a real challenge to the existence of a normal lifestyle, in a continent that relies on natural gas as a major means of heating homes, a shortage of which poses a real danger. The war in Ukraine also exacerbates the crisis by blocking the most available gas supply solution – Russia. Therefore, in the short term we are likely to see European countries looking for every possible gas source, re-mobilizing their forces to develop local gas and oil resources in order to mitigate the impact of the crisis and with it the accompanying inflationary pressures. It is not inconceivable that to the extent that these measures do not provide a solution, Europe will be required to engage in real energy markets in the form of rationing and control of gas prices. More interesting however is the impact of the crisis in the medium and long term. Although the prophecy was given to the whips, it seems that we are expected to see a significant acceleration of the pace of transition to renewable energies and the search for solutions to the range of uses that exist today for petroleum distillates. To the environmental consideration that requires going beyond the use of renewable energy, a geopolitical consideration has now been added – the need to break free from dependencies in countries that produce gas and oil, countries that do not necessarily share the same world of values with EU countries. The process will require technological and process innovation at the highest level, as well as changes in consumption habits.
Energetic backup
Along with these changes, it can be expected that more attention will be paid to maintaining the energy backup required for the transition period, so that the energy supply will be continuous both in times of war and in the face of extreme climatic events, which also increase in frequency over the years.
The crisis is of course also an opportunity and these days we see the European need to increase and diversify the sources of natural gas supply, a need that Israel may benefit from as part of the solution. In the longer term, the crisis is a real opportunity for Israeli technology companies to create the solutions that will allow the world to move safely towards a future of sustainable energy.