A brief look at Energy and Economy 

Engineering Post Report

Energy sector  surely and certainly plays  an important and vital role in the economic development of a country. The recent decades have witnessed a manifold increase  in the demand for energy every where around the globe.

The three principal divers of increase in the  energy demand  are the surge in the economic activities,  population growth and rapid technological transformation in the world.

The surge in the commodity prices in 2021and during the initial months of 2022  mainly lifted by the global economic rebound, improved growth prospects and ongoing  conflict  between Russia and Ukraine. 

According to the International  Energy Agency (IEA), the economic  recovery  from the pandemic of COVID-19, combined  with unusual  weather conditions have led to a sudden  jump in the demand for electricity by more than 6 per cent in 2021. The cost of fuel and electricity  have enhanced  cost of overall production, consequently higher prices have substantially  increased cost of living which have further eroded the purchasing power of the households  across the world.

Currently, global economy faces  higher energy prices  which may remain intact due to the ongoing Russian-Ukraine  war.. The war has led to significant  disruptions  to the production  and trade commodities for which  Russia and Ukraine  are the key exporters.

World Bank’s latest forecasts have recently  indicated that war in Ukraine  is set to trigger the largest  commodity shock.  This would quite apprehensively contribute to  huge price  for energy related goods including oil and natural gas..

The Work Bank also have further revealed  that energy prices  are set to increase by more than 50 per cent, pushing  up  cost for households and businesses. This situation has  has accordingly raised  concerns at the global level, particularly for the developing economies like Pakistan where provision of energy subsidy has become a major challenge  due to weak fiscal position.