In the energy crisis that we’ve been living through for the last few years, it can be hard to determine how and why things have gotten so difficult. Budgeting for anything from household gas to business electricity must be considered more by all parties. In reality, most of the factors influencing your bill at the end of the month come as a result of the inextricable relationship between energy and geopolitics.
Energy security and geopolitics have been linked ever since the West started importing oil, natural gas and other forms of energy. The issue for the UK is that as a major importer of energy, it’s highly vulnerable to global issues. This article will act as a basic guide to understanding the geopolitics of energy, so you can feel better equipped to understand your bills and prepare for varying periods.
Global energy markets run the world
Domestic energy prices are always going to be directly tied to global markets, which can be problematic due to the volatile nature of the countries that control the supply. International energy products often tend to come from nations with conflict-ready tendencies. For example, Russia is a major supplier of energy to Europe, and the war with Ukraine was the inciting incident of the energy crisis.
Similarly, OPEC, an organisation of Middle Eastern, European, African and South American nations linked by oil and gas production, can make decisions that cause sudden price spikes. Some of the member states in this organisation are also volatile, meaning you can’t always expect how smoothly the decisions will come to be.
When supply is limited, competition increases, causing prices to spike. The UK buys energy from these global markets, meaning any price fluctuations or spikes are handed off to consumers and businesses.
The UK has a vulnerable energy supply chain
Geopolitics and energy politics aren’t just about the supply itself. It’s also about the physical infrastructure necessary to get the energy to the area. There are a range of different pipelines for different forms of energy, all facilitated by distinct relationships.
Different pipelines
The UK’s imports move through pipelines of gas from countries like Norway and liquefied natural gas (LNG), via ships from places like the USA and Qatar. Any geopolitical tensions or instability, such as the Red Sea Attacks, can affect these shipping lanes and disrupt supply significantly.
Friend-shoring in relation to geopolitics
In the wake of tensions and conflicts, such as the aforementioned Russia-Ukraine war, the UK tends to “friend-shore”, which means only trading and doing business with countries that we align with politically. The goal of this is to reduce reliance on volatile, potentially adversarial nations. However, it can also result in major supply chain disruptions while new partnerships are formed. Beyond the interruptions of the conflict, we’ve also banned Russian energy imports, meaning we have to look in different places.
Global shifts towards renewable energy
The UK is following global trends in transitioning toward renewable sources of energy rather than fossil fuels. However, while this should eventually reduce international energy dependence, it does actually create a new and unique connection between energy and geopolitics. For example, technologies like wind turbines, solar panels and electric car batteries are run off rare minerals like lithium and cobalt, largely found and then manufactured within a few concentrated nations. This create a new form of international dependence for British people.
Keeping up with organisations like the International Energy Agency is a great way to get a handle on the geopolitics of energy – something anyone with significant energy bills should maintain awareness of. Staying informed is essential to proper preparation and management!
