The 2020s energy crisis was an energy crisis that began in the aftermath of the COVID-19 pandemic, resulting in shortages and increased prices in oil, gas and electricity markets. The crisis was particularly acute in Europe, and especially following the Russian invasion of Ukraine, the energy crisis became popularly associated with Europe.
The crisis was caused by a variety of economic factors, including the rapid post-pandemic economic rebound that outpaced energy supply, and escalated into a widespread global energy crisis. The price of natural gas reached record highs, and as a result, so did electricity in some markets. Oil prices hit their highest level since 2008.
Higher energy prices pushed families into poverty, forced some factories to curtail output or even shut down, and slowed economic growth. It was estimated in 2022 that an additional 11 million Europeans could be driven to poverty due to energy inflation. Europe's gas supply is uniquely vulnerable because its lack in natural gas sources of considerable volume, its reliance on Russia supply and US driven sanctions against the latter, while many emerging economies have seen higher energy import bills and fuel shortages.
The 2026 Iran war fuel crisis as part of the Iran War and the Middle Eastern crisis was frequently compared to the 2021-23 crises, with outsized impacts in Europe and Asia which were dependent on oil and LNG exports from gulf states.
Causes
Slow supply recovery after pandemic In 2020 the COVID-19 pandemic caused a rapid drop in energy demand and a corresponding cut in oil production, and despite the 2020 Russia–Saudi Arabia oil price war, OPEC responded slowly to the demand recovery under new normal, causing a supply-demand imbalance. The 2021–2023 global supply chain crisis further stressed the delivery of extracted petroleum. Additionally, as Europe sought to replace Russian gas, it bid up prices of U.S., Australian, and Qatari ship-borne liquefied natural gas (LNG), diverting supply away from traditional LNG customers in Asia. Because gas frequently sets the price at which electricity is sold, power prices soared as well. Both LNG producers and importers rushed to build new infrastructure to increase LNG export/import capacity, but these costly projects take years to come online.
Coal trade dispute In December 2020, after months of restrictions, China fully blocked coal imports from Australia, which was China's largest source of imported coal.
Climate abnormality impact on renewable energy
Euractiv reported that European Commissioner for Climate Action Frans Timmermans told the European Parliament in Strasbourg that "about one fifth" of the energy price increase "can be attributed to rising pricing on the EU's carbon market". In 2022, Europe's driest summer in 500 years had serious consequences for hydropower generation and power plant cooling systems. According to the New York Times, the drought "reduced hydropower in Norway, threatened nuclear reactors in France and crimped coal transport in Germany."
Globally, record droughts in China and California also threatened hydropower generation, and in 2021, Brazil's worst drought in almost a century threatened its electricity supply; Brazil relies on hydropower for two-thirds of its electricity.
Russo-Ukrainian war
Russia is a leading producer and exporter of oil and gas. In 2020, it was the third largest oil producer in the world, behind the United States and Saudi Arabia, with 60% of its oil exports going to Europe. Russia is traditionally the world's second-largest producer of natural gas, behind the United States, and has the world's largest gas reserves and is the world's largest gas exporter. In 2021, the country produced 762 bcm of natural gas, and exported approximately 210 bcm via pipeline.
The Russian military buildup outside Ukraine and subsequent invasion threatened the energy supply from Russia to Europe. International sanctions were introduced after Russia's annexation of Crimea in 2014, and subsequently tightened after Russia invaded Ukraine in February 2022; the new Nord Stream 2 pipeline's certification was later suspended. Russia had already refused to increase exports to Europe before its invasion, and the state reacted to European sanctions by reducing gas deliveries to Germany through the Nord Stream 1 pipeline, which it fully halted in early September, although the pipelines continued to contain natural gas. Gas leaks in late September resulted in the pipes becoming inoperable. European Union and NATO officials said the leaks were caused by sabotage, but did not name a responsible party. Other pipelines, such as the Druzhba pipeline, largely continued to operate.
OPEC supply restrictions In October 2022, OPEC+ cut oil production by two million barrels per day. OPEC+ claimed it is trying to prevent price volatility, although some analysts believe the goal is to increase oil prices, which had decreased over the previous few months. Saudi Arabia's foreign ministry stated that the OPEC+ decision was "purely economic" and taken unanimously by all members of the conglomerate.
2026 Iran war
In 2026, the Iran War, which began with U.S. and Israeli attacks on Iran, caused another major energy shock. The conflict disrupted oil and gas supplies through the Strait of Hormuz, while Houthi attacks and the disruption of Saudi oil exports through the Red Sea further affected global energy markets. The disruption caused significant volatility in oil and gas prices and contributed to the 2026 Iran war fuel crisis and wider economic effects.
In September 2026, Dan Jorgensen, the European Union's Energy Commissioner, issued a stark warning that "this winter might be very, very bad [for the EU] and it might be the worst one we've had since 2022," describing the most probable scenario as "very, very high prices." His remarks came as European natural gas prices underwent a nearly threefold increase over the course of the year, climbing from approximately €27 ($31) in January to more than €80 per megawatt-hour by September.
Global effects
World food crises
Food prices increased steeply as Covid lockdowns were lifted and rose even higher following Russia's invasion of Ukraine, putting millions of people at risk. According to the World Food Programme, the number of people facing acute food insecurity more than tripled between 2017 and 2021, and could further increase by 17% to 323 million in 2022. The two countries together account for almost 30% of global wheat exports and play a key role in global fertiliser supply. Russia's blockade of Black Sea ports disrupted food and other commodity exports from Ukraine, while the broader military campaign put the 2022 harvest at risk. Natural gas is a significant key component in producing fertilizers. The development of synthetic nitrogen fertilizer has significantly supported global population growth—it has been estimated that almost half of the world's population is fed as a result of synthetic nitrogen fertilizer use.
Rising energy prices are pushing agricultural costs higher, contributing to increasing food prices globally. The agriculture and food industries use energy for various purposes. Direct energy use includes electricity for automated water irrigation, fuel consumption for farm machinery and energy required at various stages of food processing, packaging, transportation and distribution. The use of pesticides and mineral fertilizers results in large quantities of indirect energy consumption, with these inputs being highly energy intensive to manufacture. While the share varies considerably between regions—depending on factors such as weather conditions and crop types—direct and non-direct energy costs can account for 40% to 50% of total variable costs of cropping in advanced economies such as the United States. Higher energy and fertiliser prices therefore inevitably translate into higher production costs, and ultimately into higher food prices.
In May 2022, Máximo Torero, chief economist at the U.N. Food and Agriculture Organization, warned European politicians that if they move away from natural gas production too soon, the price of fertilizers would rise and more people in the world would suffer from hunger. In 2023, 64% of firms that took part in a survey on investment were concerned about energy prices, while 46% were concerned about regulatory frameworks and pricing instability. Businesses in Central, Southern and Eastern Europe reported a higher rate of energy consumption increases of 25% or more than the EU average (77% vs. 68%). Energy savings and energy efficiency were most often mentioned as responses to the energy shock by businesses in Europe, but they were less likely to renegotiate their energy contracts. (62% vs. 67%).
Energy transition
Aside from inflationary pressures, this energy crisis has also increased the use of coal in energy production worldwide. Coal use in Europe increased by 14% in 2021, and was expected to rise another 7% in 2022. Soaring natural gas prices have made coal more competitive in many markets, and some nations have resorted to coal as a substitute for potential energy rationing in the 20222023 winter. With demand for coal increasing in Asia and elsewhere, global coal consumption rose by 1.2% in 2022 to more than 8 billion tonnes for the first time in history; coal-fired power plants have been reopened or had their decommissioning postponed, and coal-production caps have been removed. The high prices of fossil fuels due to the 2022 Russian invasion of Ukraine, however, have made renewable-energy sources more attractive, and a February 2023 analysis by The Economist found that the invasion had "fast-tracked the green transition by an astonishing five to ten years". In Europe and the US, the green transition is viewed as a danger by 41% of energy-intensive manufacturers, compared to 31% of enterprises in non-energy heavy industries.
In 2023, approximately 32% of EU enterprises have invested in new, climate friendly business sectors and technology, to stay up to date with the green transition. When compared to the United States, more European Union businesses invest in or implement renewable energy and sustainable transportation. Also in 2023, 70% of EU enterprises expect energy prices to rise by more than a quarter, compared to only 30% of US firms. In the same year, results from a survey showed that 51% of EU enterprises polled invested in energy efficiency. Energy prices continued to be a key issue for companies in the EU, with many citing it as a factor for potential investment cuts. With the increase in energy prices in the EU (as compared to 30% of US firms experiencing this), it would take over a decade for energy costs to stabilise at low levels. European enterprises would need to find strategies to cope. Responses 2021 Overall, the response to this rising crisis has been to return to coal and other polluting energy sources, subsidizing prices, easing gas taxes, or even lowering the price of carbon dioxide emissions. These short-term solutions lower electricity bills but go exactly in the opposite direction of what is needed to prevent the 1.5 degree increase in temperatures, increasing the likelihood of a climate apocalypse. Europeans rushed to increase gas imports from producers such as Algeria, Norway and Azerbaijan. EU members also introduced gas storage obligations and agreed on voluntary targets to cut gas and electricity demand by 15% through efficiency measures, greater use of renewables, and support for efficiency improvements.