Worldwide Energy Crisis

Due to limited generating capacity, South Africa’s power utility, Eskom, has been implementing daily power cuts during selected times to conserve power. These cuts can last for several hours, and disrupt work and life for residents across South Africa.

“I am afraid that the power cuts that are being experienced in South Africa are having a huge impact on the South African economy,” South African economist Dawie Roodt told OZY. Living with regular power disruptions forces residents to turn to candles, gas and solar, adding to an already high cost of living, Roodt says.

The uncertainty around the supply of electricity also harms businesses' ability to plan. The South African Chamber of Commerce and Industry's (SACCI) monthly business confidence index has seen a decline resulting from the high cost and inconsistent supply of energy, in addition to other factors, such as uncertainty caused by Russia’s invasion of Ukraine.

In a statement, the power utility company Eskom said, “We appeal to all South Africans to help limit the impact of the shortages by continuing to reduce the usage of electricity and to switch off all non-essential items.”

An S&P Global survey of managers responsible for purchases at Egyptian firms has revealed that the cost of purchasing goods has accelerated, leading to a decline in new orders. Some are blaming new import requirements by the Egyptian government mandating that businesses obtain bank-issued letters of credit to import goods. Meanwhile, the Egyptian pound has weakened relative to the U.S. dollar, while global commodity prices have skyrocketed as a result of the war in Ukraine. Business confidence in Egypt has fallen to its second-lowest level on record, according to Bloomberg News. (Source: Bloomberg)

According to the Wall Street Journal Dollar Index’s measure of the dollar against 16 currencies, the U.S. currency fell 1.1% in May, breaking a streak that had led to a multidecade high in early May. The fall has slowed the dollar’s recent rally against other major currencies over the past several months. While consumer spending remains strong and employers are adding jobs, the pace of wage growth has now slowed, and U.S. consumers are dipping into savings to finance their spending — a hint at how households are dealing with higher prices. “I think the dollar has topped out,” said Steve Englander, head of North American macro strategy at Standard Chartered. (Source: The Wall Street Journal)

U.S. President Joe Biden is expected to visit Saudi Arabia and other Middle Eastern nations in July amid surging gas prices. Currently, the average price for a gallon of gas in the U.S. is around $4.88, according to data from the U.S. Energy Information Administration. During his 2020 campaign, Biden pledged to castigate Saudi Arabia for the assassination of dissident Jamal Khashoggi. But amid the increase in global energy prices owing to Russia’s invasion of Ukraine, Biden is expected to ask Saudi Arabia to produce more oil to lower prices at the pump. (Source: The New York Times)

Leaders from the Americas are at work on a framework for greater cooperation around the flow of migrants. According to Bloomberg News, this is the result of months of collaboration and will be a culmination of the Summit of the Americas, held this week in Los Angeles. Proposed pledges include improved access to public services for migrants and refugees, along with legal employment opportunities. Mexican President Andrés Manuel López Obrador declined to attend the Summit, however, because Cuba, Nicaragua and Venezuela had been excluded, reportedly due to human rights concerns. (Source: Bloomberg)

China’s top ride-hailing app Didi will soon resume operating, as Chinese regulators conclude a yearlong investigation. Didi was removed from domestic app stores last year after Chinese authorities cited concerns about data collection, calling it an issue of national security. The app then became a symbol of China’s crackdown on its domestic tech companies. The decision to end this probe and allow Didi to resume operations is an indication that Beijing is eager to address its flagging economy. Didi had nearly 600 million users globally as of January 2021, and as this went to press, the company was worth about $11 billion on the New York Stock Exchange. (Source: The Wall Street Journal)

“There remains immense pressure on inflation as fuel and energy costs continue to climb,” Ronnarong Phoolpipat, Director-General of Thailand’s Trade Policy and Strategy Office, told Bloomberg News. Consumer prices in Thailand rose 7.1% as compared to one year prior, the country’s highest rate since 2008, according to new data released on Monday, with price increases particularly sharp in food and energy. “We just wish that the OPEC’s oil production increase will start to bring the prices of crude down,” Ronnarong told Bloomberg News. (Source: Bloomberg)

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Amid commitments to phase out Russian gas and oil, the EU is entertaining alternatives previously considered impractical, according to the Wall Street Journal. Possible measures include encouraging or even requiring the replacement of gas-powered heating systems with electric heat pumps, and possibly capturing heat generated by large data centers. Danish member of the European Parliament Niels Fuglsang said, “You can wonder what is more unrealistic: to have an ambitious approach on energy efficiency or keep being dependent on Putin’s gas and oil.” (Source: The Wall Street Journal, The Economist)

In a tentative deal reached without Ukraine’s participation, Turkey has offered to clear mines from the Odesa coast and escort grain shipments from this vital Black Sea port, which could help address regional food shortages. But Ukrainian officials fear this plan will leave the port vulnerable to Russian attack. Ukraine’s Deputy Economy Minister Taras Kachka said Russia sought to place responsibility for supply-chain disruptions on Ukraine. “But the fact remains that the food crisis has been artificially created by Russia and Russia alone,” said Kachka in a message to Bloomberg News. Meanwhile, U.S. State Department officials warn that Russia is attempting to sell stolen Ukrainian grain to drought-stricken African nations. (Source: Bloomberg, New York Times)

If rising energy costs have changed your life or business plans, we'd like to hear about it.

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