KUALA LUMPUR: Far from emerging from the Covid-19 shock, there is an energy crisis affecting the global supply of oil, gas and coal. The world is facing a new energy crisis it has not seen since the 1970s.
Energy commodity costs have soared on supply concerns in the wake of Russia's invasion of Ukraine and spread of Covid-19's Omicron variant.
European and Asian gas prices are at an all-time high, oil price is at a three-year high, and the price of coal is soaring on the back of energy shortages across China, India and Europe.
Skyrocketing coal prices
Coal prices rocketed to a new all-time high last week, with the benchmark Newcastle futures topping US$400 a tonne, breaking the previous record of US$269 set in October 2021.
Coal prices could cross US$500 per tonne in 2022, underpinned by soaring gas prices which might lead European countries to turn to coal from gas, Rystad Energy said last week.
Oil prices, on the other hand, could hit US$240 per barrel this summer in the worst-case scenario, if Western countries rolled out sanctions on Russia's oil exports, the Oslo-based consultancy said.
"If sanctions on coal trade with Russia eventuate or there is a physical disruption to Russian rail/port transportation, then the sky's the limit (for coal prices)," the firm said.
Coal prices hit US$462 per tonne on March 10 this year, up from US$186 per tonne on Feb 23 and were likely to pass US$500 per tonne this year, Rystad Energy research suggests.
Russia is Europe's largest supplier of thermal coal, providing more than 40 per cent of the region's natural gas, more than a quarter of its oil imports and almost half of its coal.
Indonesia is currently the world's biggest exporter of thermal coal, followed by Australia and Russia.
In Asia, there is not enough coal to meet expected demand. It is the main cause of an emerging electricity crisis in many Asian countries including China.
A cold winter followed by a hot summer and stronger economic growth has led to greater Chinese demand for coal, and suppresses overall supply.
Impact on electricity generation
The cost of commodities such as oil, coal and natural gas has a major impact on the cost of electricity generation. Therefore, with the shortage of supply, it creates a knock-on impact on electricity tariffs and fuel prices.
One of Sri Lanka's biggest fuel suppliers reportedly raised its prices by as much as 12 per cent on Feb 26 as the cash-strapped island's energy crisis worsened.
The increases came after a seven per cent price rise three weeks ago and will add to the upward pressure on inflation, already at a record high.
Lanka IOC, a fuel retailer which accounts for a third of the market, said it was increasing prices for diesel - commonly used by public transport - by 12 per cent, and petrol up 11 per cent.
Singapore, which relies on imported natural gas for almost all of its electricity production and is highly exposed to global supply and demand shocks, has started to raise electricity prices in April 2021, mainly due to the higher cost of fuel for producing electricity by the power generation companies.
Electricity prices in Singapore had been climbing higher since July 2021, according to dollarsandsense.sg recently.
The regulated tariff rate for households by Singapore Power increased by 8.8 per cent or 2.06 cent per kilowatt hour (kWh) over the same period.
However, for consumers who had to re-contract with an open electricity market (OEM) retailer in the last couple of months, the price increase was far more significant.
For example, the rates offered by OEM retailers went from a range of 17 to 19 cents before July 2021 to 27 cents currently for a one-year fixed price plan. That translated to roughly a 50 per cent increase for consumers.
According to The Straits Times, Singapore's electricity tariffs would be reviewed every quarter based on guidelines set by the electricity industry regulator, Energy Market Authority.
For example, for April-June 2021, the tariff for households increased by 8.7 per cent from the previous quarter, while the increase was 3.9 per cent for July-September 2021 and 3.1 per cent for October-December 2021.
The electricity tariff for households - including goods and services tax (GST) - was raised to 27.22 cents per kWh for the first quarter of this year, up from 25.8 cents per kWh in the preceding quarter.
Similarly, the gas tariff for households - including GST - was revised upwards to 21.62 cents per kWh from 20.37 cents per kWh over the same period.
This means that on a year-on-year basis, the republic's electricity tariff rose by 22.6 per cent in January, while the gas tariff increased by 17.3 per cent.
Implication on Malaysia
As a coal importer, Malaysia is not spared from the direct impact of the commodity's soaring prices.
Industry observers said the government was facing surging generation cost to ensure the people continued to get reliable power supply, and this was not sustainable if the cost kept rising and were not passed down to consumers.
The changes in electricity tariff was beyond the government's capability to control as the tariff was extremely vulnerable to fluctuations in global fuel prices, such as those for coal and natural gas, they added.
The increase in coal prices had caused the cost of generating electricity to increase by 45 per cent, said Energy and Natural Resources Minister Datuk Seri Takiyuddin Hassan on March 15.
This caused a big impact on electricity tariff in the peninsula as coal makes up 59 per cent of power generation fuel source.
However, the government had decided to give a rebate of two sen per kWh for domestic consumers from February to June this year, Takiyuddin added.
There is no getting away from soaring energy prices and crisis.
There is already a surcharge imposed on the commercial and industrial customers now.
If the global energy scenario remains or worsens in the coming weeks, there is no possibility for us to escape from higher surcharge in the next Imbalance Cost Pass Through cycle.