This report counts the economic damage from a forever loss of 10% of global Oil and Gas supply. That’s about half the current shortfall created by the Gulf shipping paralysis. The cost is that global GDP contracts 3%. And there are additional security and defence costs too.
But the key is this! To equate demand and reduced supply (Brent) crude oil prices settle at US$95 to US$100 dollars/bbl. and can jump above US$125 as the supply shortage first bites.
World inflation jumps by 2-3 percentage points; a step change that could become a spiral unless the central banks have the guts to reign in expectations. We've talked about that before!
This report is not about what happens when the gas at the pump costs more but about when there is no gas at the pump.
How do economies repair? Because they will.
Economies have to recoup lost growth and expand anew with less energy in the tank. That means big increases in energy efficiency. In turn that means renewables will boom on a global scale.
Renewables are now being made super-efficient by energy shortage and competitive due to increased fossil fuel energy prices. But even if oil prices went down, the acclerated move to renewables would not. At least not by much! The Energy Chokepoints of the world are now too risky to depend on. Policy makers and people have got the message.
There are only two big economies which have the polices in place and the resources needed to achieve this transformation. The two are the EU and China. They are the locomotives and the wagons are global energy efficiency and economic output.
There is a long list of winners and losers that fall out of this analysis. But the surprise one is the EU leadership in growth and renewables.
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