When the coronavirus pandemic first swept the world in early 2020, gas reserves were abundant and the price was at rock bottom. But production of both gas and oil was sharply curtailed as economies shattered, and reserves were eaten up by the unusually cold weather in Europe last winter.
The energy crisis first emerged in China, the world’s manufacturer, as global demand for its products suddenly and unexpectedly shot upward this year. Coal stocks were low, and an unofficial Chinese ban on Australian lignite meant they couldn’t quickly be replenished. Power companies turned to the spot market for liquefied natural gas (LNG) instead, and its price soared.
In Asia, the spot price, measured in a million British thermal units, went from less than $5 in September 2020 to
more than $56 this October.
As a result curbs on power consumption have been implemented across two-thirds of China, disrupting factory production and daily life.
Some factories have shut down altogether. China’s power cuts will further disrupt international supply chains already stretched by the pandemic. Factories have had to reduce production at a time when they are usually ramping up for the December holiday season.
In Guangdong, China’s most populous province, authorities have banned the use of elevators in office buildings for the third floor and below, encouraged residents to use natural light as much as possible, and asked for air conditioners to be adjusted to higher temperatures. Beijing and Shanghai canceled annual light shows during the Golden Week holiday that spanned the first week of October.