Source: International Energy Agency “World Energy Outlook 2013”
Figure 8.3 Projected energy demand (million tons of oil equivalent)Energy Crisis
In a free-market economy, the price of energy is driven by the principles of
supply and demand. Sudden changes in the price of energy can occur if either the
supply or the demand changes. In some cases, an energy crisis can be brought on
by a failure of world markets to adjust prices in response to shortages. For
example, the oil supply is largely controlled by nations with significant reserves
of easily extractable oil, such as Saudi Arabia, which belongs to an association
of oil-producing countries known as OPEC (Organization of Petroleum
Exporting Countries). When OPEC reduces the output quotas of its member
countries, the price of oil increases as the supply diminishes. Similarly, OPEC
can boost oil production to increase supplies, which drives down the price. When
OPEC raises the price of oil too high, the demand decreases and the production
of oil from alternative sources becomes profitable.
However, since 2014, world oil prices have plunged almost 70%. Reasons
include that the United States domestic production has nearly doubled over the
last several years (due in large part to expanded production in the Gulf of
Mexico and fracking), reducing U.S. domestic oil imports, which forces the
producers to drop prices. In response, in 2016, OPEC and non-OPEC members
(e.g., Russia) agreed for the first time in eight years to cut back oil production in
an effort to drain world oil inventories so that the price of oil would rise.
On the demand side, weak economies and energy-efficient vehicles result in