Since their discovery, oil and, in more recent times, natural gas have played a critical role in the economic, political and social development of the world. Whilst bringing great wealth, they have also been the cause of huge instability. Those countries or regions which lack these natural resources, including most of Europe, have been consistently disadvantaged, always at the mercy of the markets, the energy exporters, or both. The war in Ukraine has once again demonstrated this uncomfortable state of affairs. However, the present energy shock is just the latest in a long line of similar crises which have occurred since the Second World War.

The localized nature of oil and natural gas deposits has a profound effect on the distribution of supply chains and this effect is only getting more pronounced. Whilst Europe does not have access to cheap energy supplies and must rely on a global market, other regions and countries, such as the Middle East and US, do. China’s demand for oil outpaced its own resources in 1993 but it has immense coal deposits which it relies on for electricity generation. It has also benefited from cheap supplies from Russia (as has India) and this will provide a significant advantage as its economy opens back up after Covid. The importance of oil and gas to the location of manufacturing will lead to a re-balancing of economic and political power, not away from the whole of the West but certainly from Europe. As more carbon taxes are applied to ‘dirty’ energy sources, this trend will only accelerate.