For many years, there has been a theory that imports of oil would become a problem before there was an overall shortage of fossil fuels. In fact, when I look at the data, it seems to be clear that oil imports are already constrained.
As I look at the data, it appears to me that coal and natural gas imports are becoming constrained, as well. There was evidence of this constrained supply in the spiking prices for these fuels in Europe in late 2021 and early 2022, starting well before the Ukraine conflict began.
Oil, coal, and natural gas are different enough from each other that we should expect somewhat different patterns. Oil is inexpensive to transport. It is especially important for the production of food and for transportation. Prices tend to be worldwide prices.
Coal and natural gas are both more expensive to transport than oil. They tend to be used in industry, in the heating and cooling of buildings, and in electricity production. Their prices tend to be local prices, rather than the worldwide price we expect for oil. Prices for importers of these fuels can jump very high if there are shortages.
In this post, I first look at the trends in the overall supply of these fuels, since a big part of the import problem is fossil fuel supply not growing quickly enough to keep pace with world population growth. I also give more background how the three fossil fuels differ.
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