Topline
Soaring energy prices triggered by Russia’s invasion of Ukraine could have pushed millions of people around the world into extreme poverty in 2022, researchers warned on Thursday, urging governments to do more to protect vulnerable households as living costs rise and oil and gas companies boast record profits.
Energy costs soared after Russia invaded Ukraine.
Key Facts
Between 78 million and 141 million people around the world could be pushed into extreme poverty as a result of increasing energy costs following Russia’s invasion of Ukraine, according to peer reviewed research published in Nature Energy.
The figure assessed the impact of changing energy costs on households across 116 countries covering more than 87% of the world’s population between February and September 2022, and used an updated version of the World Bank’s latest poverty assessment from 2017 to define extreme poverty as those living on less than $2.15 a day.
Globally, households’ total energy costs rose by around 63% to 113%, the researchers predicted, largely from the rising cost of products, services, food and other goods indirectly pegged to energy prices.
These indirect costs accounted for 45% to 83% of the total increase, the researchers said, with direct energy costs like heating and gas bills contributing 15% to 30%.
Overall, the rising energy costs helped hike households’ total expenditure between 2.7% and 4.8% globally, the researchers said, adding to pressures from the Covid-19 pandemic and inflation.
The experts urged governments around the world to offer more targeted support to vulnerable households, ensuring they have access to affordable energy, necessities and food.
Crucial Quote
Study author Klaus Hubacek, a professor of science, technology and society at the University of Groningen in the Netherlands, said the energy crisis precipitated by Russia’s invasion has worked to “undermine… hard-won gains in energy access and poverty alleviation” in poor countries. However, it is important the policies designed to address the issue do not clash with long-term climate goals, Hubacek stressed, and the effects of the climate crisis are already felt unevenly around the world.
What To Watch For
The authors warned some of the policies used to mitigate high energy costs, such as fuel subsidies or scaling back climate targets, solve the current problem but risk a setback to the climate crisis.
Key Background
Russia is a major player in the global energy market and the sector is crucial to its national economy. In 2021, Russia was the world’s largest exporter of natural gas, the second-largest exporter of crude oil and the third-largest exporter of coal, and its decision to invade Ukraine in 2022 upended global supply chains. Moscow’s willingness to use energy as a weapon to pressure Ukraine’s supporters—notably in Europe, which is heavily reliant on Russian gas—and Western sanctions targeting the industry exacerbated this, disrupting the market and pushing costs upwards. As energy influences everything from transportation, production, heating and sales, prices rose and costs of living soared. Sky-high prices proved a boon to oil and gas companies like BP, Shell, Chevron and ExxonMobil, which reported record profits in 2022. Governments and critics around the world have accused the firms of profiteering from the crisis and of hoarding the gains from rising energy costs instead of working to bring prices down.
Further Reading
Russia is using energy as a weapon (Economist)
BP Boasts Record Profits As Oil Giants Report Historic Windfalls (Forbes)
Source: https://www.forbes.com/sites/roberthart/2023/02/16/russias-war-in-ukraine-might-have-pushed-millions-into-extreme-poverty-researchers-warn/