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World at Crossroads Over Energy Supply: “This Is Not Over Yet,” Chang Says

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The world is in crisis mode right now, from an unthinkable natural disaster in Japan to civil unrest throughout the Middle East and North Africa.

As if these events were alone not unsettling enough, there is perhaps an even bigger crisis coming down the pike that could "shake global markets," says Forbes columnist Gordon Chang: The fight over global energy resources as fears of supply shortages put pressure on already high energy prices.

"The real problem for the globe right now is you've got problems in Libya, you've got problems in Japan and they're intersecting," says Chang, author of Nuclear Showdown: North Korea Takes on the World and The Coming Collapse of China. "This is not over yet because you have the gulf aflame right now," with the governments of Yemen and Bahrain teetering on the brink of collapse.

Saudi Arabia is also a concern since it provides about 10 percent of the world's oil. So far, the protests in this oil rich country have been minimal compared to the other Arab nations.  Should the intense turmoil spread to Saudi Arabia, Chang and other experts foresee a very dire outcome for the global economy.

"It is really the fear of disruptions of supply that is creating the risk-premium" in energy prices, he says.

Energy Demand on the Rise

Since the earthquake and tsunami hit, Japan has lost nearly half of its nuclear power capacity, or roughly 16 percent of its total energy output, Chang explains. At some point, the country is going to have to switch to coal or liquefied natural gas (LNG) for its energy needs.

The impact of Japan's disaster on prices is not so significant right now, because the country's production has been temporarily suspended. But Chang predicts energy prices will rise further in the second half of this year after Japan has had time to deal with its disaster and is looking for energy resources to power its rebuilding efforts.

But Japan isn't the only country seeking alternative energy resources in the wake of the disaster at the Fukushima Daiichi nuclear power plant.

If the U.S. decided to downgrade rather than increase its reliance on nuclear power as a result of Japan's nuclear disaster, this country will also be vying for resources.

And then there's China.

"China has a manufacturing-heavy economy and those economies are much more dependent on energy than for instance ours," says Chang. "The Chinese are really scrambling right now because they know they are going to lose their friends in North Africa and the Middle East."

But the turmoil in the region will persist until the high unemployment and rising food inflation is addressed. "This is a problem that is going to go forward and we know that there will be disruptions," Chang says.

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