The Energy Supply and Demand Conundrum

Joaquin Narro and Monica Caamano

Global energy supply and demand is a complex conundrum that provides an optimal breeding ground for inefficiencies that can subsequently be monetised through the development of systematic trading strategies. Energy sources, which are ultimately consumed by end-users, can be classified as primary or secondary according to their nature (Eurostat, 2018). Primary energy is any naturally occurring form of energy. If the primary energy source is not depleted when used, we describe this energy as renewable. This definition therefore includes sunlight, wind, rain, tides, waves and geothermal heat. Non-renewable primary energy comes from sources that will eventually run out, such as fossil fuels (crude oil, coal and natural gas), nuclear energy and, in some instances, biomass.

In most cases, a transformation process is required to accommodate the available primary energy to the end-user’s needs, from heating to transportation, lighting to mining, construction to agriculture. The transformation process, which could be refining crude oil, burning coal or harvesting wind energy through windmills, typically results in secondary energy sources, such as electricity or petroleum products (Marx