Steve Schwarzman, co-founder of Blackstone (BX), the latest equity-firm investor to warn of an impending energy crisis. Speaking at the Future Investment Initiative conference in Saudi Arabia, he warned that a global energy shortfall might cause “serious unrest.”
The rising cost of oil and gas is adding to Schwartzman’s concerns. On Monday, US oil prices surpassed $85 a barrel for the first time in the past seven years. In addition, gas prices continue to rise, with the national average of $3.40 per gallon.
“You’re going to get very unhappy people around the world in the emerging markets in particular but in the developed world,” Schwarzman said at the Future Investment Initiative. “What happens then, Richard, is you’ve got real unrest. This challenges the political system, and it’s all utterly unnecessary.”
Natural gas prices have surged, mainly in Europe and Asia, driving factory layoffs, according to CNN. In addition, due to excessive demand, Chinese energy firms have also been forced to curtail or stop their output.
According to Schwarzman, half of the problem is that fossil fuel businesses are having trouble borrowing money to fund their expensive industrial sites, notably in the United States. But, of course, catching up on supply will be difficult without new manufacturing.
“We’re going to end up with a real shortage of energy,” Schwartzman told the network. “And when you have a shortage, it’s going to cost more. And it’s probably going to cost a lot more.”
To put it another way, it’s a classic supply and demand situation. There is a lot of energy demand, but there isn’t much of it present. Therefore, the cost of the product is bound to increase. But, on the other hand, increasing supply is also challenging, according to Schwarzman, since energy businesses find it incredibly hard to borrow money to support oil and gas production.
“If you try and raise money to drill holes, it’s almost impossible to get that money,” he told CNN.
Schwarzman urged governments to step in, particularly to aid in the transition to greener energy.
“There’s unanimity something should be done, but how you get from where we are today to a green world is utterly undefined,” he said.