Next year could see victories as the world overcomes plagues of 2022

Four plagues dominated this year: a literal pestilence, war, inflation and climate change. They will continue to cast a loathsome shadow as we pass the New Year. But with some optimism and ingenuity, 2023 can bring recovery and resurgence.

Covid continued to exact a high death toll, and a lingering legacy of ill health and disruptions to work and travel. Most parts of the world, aided by vaccinations, have accepted the disease as endemic, with a steady revival of commuting and tourism boosting oil demand.

China, though, persisted in its zero-Covid policy, with oil prices oscillating in response to every oracular pronouncement from the Politburo.

On December 6, its coronavirus czar Sun Chunlan ripped off the sticking plaster: the most draconian restrictions were lifted. A wave of sickness and death promptly spread across the Middle Kingdom.

Some have speculated that Russia’s military offensive in Ukraine was influenced by the pandemic isolation of the man in the Kremlin. From an energy point of view, though, the conflict was well-timed.

The slow strangulation of Europe’s gas supplies from September 2021 threatened the continent. The rise in oil prices from the early 2020 crash, aided by Russia’s alliance with Opec limited the severity of sanctions that could be imposed.

Oil prices did surge following the conflict’s outbreak, but since June and especially November, they have fallen back to their starting point, even though Opec resumed its production cuts, and Europe and the US belatedly introduced unprecedented bans and price caps on Russian oil exports.

Gas prices have also dropped from August’s extremities, though they are still very high by historic standards.

A warm start to the winter has helped European residents, even though colder weather has blown into both Europe and North America more recently.

High energy prices, illness-induced absenteeism, disrupted supply chains and geopolitically-mediated trade protectionism have all helped stoke inflation.

Tighter global monetary conditions by central banks globally, particularly in the US and Europe, have raised the risk of a recession and contributed to lower oil prices.

The cut-offs of Russian gas and the consequent scramble for limited supplies of liquefied natural gas (LNG) led to a revival in the use of coal, the most polluting fuel, across Europe and Asia.

November's Cop27 conference in Egypt produced some progress on technical issues and finance, but no breakthroughs on climate ambition.

In the summer, record heatwaves struck Europe and China, and unprecedented floods deluged Pakistan.

In the Middle East, Gulf countries have warded off these plagues better than almost anywhere else.

The pandemic has been handled well, oil production was allowed to rise until October, energy prices and investment have been strong and inflation moderate. The UAE, Saudi Arabia and Kuwait all saw their strongest economic growth for about a decade this year.

Despite all the usual hotspots, the region has thankfully avoided further serious conflict, apart from the brutal response to the protests in Iran.

But most of the remainder of the world has suffered. So what reason is there for optimism in 2023?

Hopefully, progress on combating Covid will continue, the China wave will recede, and no more serious variants will emerge.

Continuing gains in travel would support oil demand; it would also ease some of the damaging isolationism and lack of person-to-person contact from the past three years.

Much violence lies ahead in Ukraine, but the loss of gas revenues and the tightening measures against oil exports will constrict the Russian economy.

The weather over the remaining two to three winter months will be crucial for Europe’s living standards and industry. The continent’s political coherence has remained impressively solid.

Observers have warned that 2023 will be an even tougher year for Europe’s gas consumers since it will receive virtually no Russian supplies for the whole year to refill its drained storage.

There is little new LNG on the world market until 2025. Government coffers to support industries and householders are emptying.

But as long as Brussels can avoid some mooted, misguided gas market policies, it should actually come through better next year.

Repairs to French nuclear stations, a surge in renewable installations, better energy efficiency and — unfortunately — recession and deindustrialisation, will reduce gas demand.

New LNG import terminals in Germany and elsewhere provide better access for gas to central Europe.

A more open confrontation between Washington and Beijing remains an unlikely though potentially cataclysmic prospect.

Closer to home, it will take wise policies to avoid combustion between a besieged Iranian regime, the failure of the nuclear negotiations, and a hawkish Israeli government.

The oil market will be wrenched between sanctions on Russia, Opec policy, the odd supply disruption elsewhere, and demand.

In turn, demand depends on economic growth, with a feared global recession.

But a mild downturn — not a repeat of 2008-2009 or 2020 — would still see some oil consumption growth, and a moderation of prices rather than a collapse, with room for Opec to fine-tune output.

The International Monetary Fund forecasts global inflation halving by the end of next year.

Key motors for tackling climate change are gaining momentum.

Today’s expensive and insecure energy, along with huge new climate and energy packages in the US and EU, will spur the deployment of new gas to replace coal, renewables, electric vehicles, advanced nuclear power, breakthrough batteries, hydrogen and carbon capture.

The UAE, hosting Cop28 next November, has a crucial opportunity to advance bold but practical cuts in emissions.

For all the solar panels we see on European roofs and Teslas on Gulf roads, we will all breathe a little easier when we see global greenhouse emissions actually falling.

Global heating drives energy insecurity, disease, war, inflation and economic decline. Next year can see victories over viruses and violence, conflict and climate change.

Robin M. Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis