Nature warns 141 million people at risk of poverty due to energy crisis

Central and Southeast Asia are leading the rise in direct and indirect energy costs for private consumers, a study published in Nature Energy found.Latin Americans hit the hardest by the crisis

The global energy crisis, which began amid the conflict in Ukraine, has raised the cost of living around the world, potentially pushing between 74 million and 141 million people into extreme poverty, according to a study published in Nature Energy.

The situation in the energy markets became more complicated after the covid-19 pandemic and worsened significantly after the outbreak of the conflict in Ukraine, which contributed to the global energy crisis, the authors point out. They believe that global energy prices are rising due to a variety of factors, including ongoing geopolitical conflict, the rapid recovery of the global economy from the pandemic, continued dependence on fossil fuels, and a serious mismatch between supply and demand.

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High energy prices place an additional burden on households for two reasons. On the one hand, energy bills are rising (direct costs), on the other hand, spending on goods and services that have increased in value due to the energy crisis (indirect costs).

The authors of the study modeled the direct and indirect impact of rising energy prices on 201 spending groups in 116 countries. A set of nine different scenarios shows that total household energy costs will increase by 62.6% to 112.9%, resulting in a 2.7% to 4.8% increase in overall spending.

The direct and indirect impact of energy prices on the burden of spending on households differs significantly across countries. For example, in the SC1 scenario (in which the researchers took the average prices for oil , gas and coal from February 24 to September 13, 2022 as a basis ), it is indicated that the increase in direct household energy costs in 116 states ranges from 51.1 to 176 ,1%.

The largest increase in this indicator was observed in Central Asia (70.3% in the region), especially in Mongolia and Tajikistan (176.1%). Latin American households suffered the least (51.5% increase in direct energy costs).

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Central Asia also leads in terms of overall growth (both direct and indirect are taken into account) of energy costs (80.7%). It is followed by South and Southeast Asia (74.5%). For example, in Laos, direct energy costs increased by 51.1% and total costs by 100.8%.

The growth of both direct and indirect spending for households in RUSSIA (71.6%) was slightly lower than the world average (73.9%), the material says.

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The authors remind that energy can be a means of political conflicts. The countries participating in them limit supplies in order to increase their influence on energy-dependent states. Scientists point out that the energy crisis of 2022 is one example of such actions.

Unlike the “oil shocks” of the 1970s (in 1973, some states in Africa and the Middle East temporarily stopped oil supplies to the West because of its support for Israel in a military conflict with Arab countries), the current energy crisis is associated with a sharp rise in prices for all types of fossil fuels. fuel, indicated in the study. The world's economies are now more interconnected than ever before, impacting global supply chains and putting painful pressure on the cost of living for households.

In the current situation, the protection of vulnerable populations should be a clear priority, the authors point out. They give examples of measures already taken during the crisis. For example, in Romania, Estonia, and Latvia, local authorities have provided one-off energy subsidies to low-income citizens. Thailand has increased these subsidies and extended the reduced tax on diesel fuel. In the UK, Italy and Cyprus, tax increases for energy companies are being discussed in the face of unforeseen costs and additional pressure on the budget.