Lewis Whyld | PA Pictures Getty Images European countries are facing the possibility of reduced energy supplies, as the dispute between Moscow and the West over payments for Russian exports rages. European countries are heavily dependent on Russian oil and gas supplies, but Moscow’s invasion of Ukraine in late February led the EU and the United Kingdom to impose a barrage of sanctions including cuts in Russian energy imports. In early March, the EU pledged to cut Russian gas imports by two-thirds before the end of the year, while Britain has said it will phase out Russian oil imports by the end of 2022. But these moves pose risks to an area already facing an energy crisis. Limited gas supplies boosted wholesale prices to record levels in Europe last year, with households in Britain seeing energy bills rise by more than 50% from 1 April.
Gas evaluation
Germany warned on Wednesday that it could soon face a gas emergency that could require a reduction in gas supplies. German Economy Minister Robert Habeck said the “early warning” measure did not mean the country should resort to gas cuts, but called on consumers and companies to reduce energy consumption. Meanwhile, the Austrian government announced on Wednesday that it had launched the first step of a three-stage emergency plan that would see it monitor the country’s gas market more closely. Officials cited Russia’s demand for ruble payments as the reason for launching the contingency plan, noting that if it reaches the third stage of the plan, emergency control measures such as the bulletin may come into force. According to Chi Kong Chyong, director of the Cambridge University Energy Policy Forum, Germany and Austria may not be the only ones to have to take extreme emergency measures if Western countries continue to blockade Russia. Putin said last week that the Kremlin would seek payment in rubles for gas sales from “unfriendly” countries – a request rejected by the G-7 nations. On Thursday, the Russian leader said he had signed a decree requiring foreign buyers to pay in rubles for Russian gas from April 1. “If they can not agree on the terms of payment and the flow of gas from Russia stops, then other European countries will also have to take emergency measures,” Chyong told CNBC. “Despite the fact that we are entering a warmer period consuming less natural gas, we need gas to flow to our storage facilities to use it in the coming winter months, when temperatures drop and we need gas again for heating.” “If the flow of Russian gas stops, all European governments – including the British – must start launching contingency plans, including public” promotion “campaigns, to prepare our citizens to save energy during the winter months.”
Diesel evaluation
Meanwhile, Jim Watson, professor of energy policy and director of the UCL Institute for Sustainable Resources, said it was “certainly possible” for the UK to see a government-imposed car fuel cut. Britain is finding it more difficult to move away from Russian oil than from moving away from Russian gas because it was more dependent on oil imports, Watson told CNBC by telephone. Speaking to British lawmakers at a meeting of the British Parliament’s Finance Committee in March, Amrita Sen, director of research at Energy Aspects, warned that sanctions on Russian energy exports could have serious consequences for Europe. “Russia has many other intermediaries and other companies that would buy and sell its raw products,” he said. “Especially when it comes to products, diesel is where we fear it could come out in Germany later this month. You could definitely see the impact in the UK.” Meanwhile, Russell Hardy, CEO of Swiss oil trader Vitol, told an FT commodity summit last month: “Europe imports about half of its diesel from Russia and about half of its diesel from the Middle East. “This systemic diesel deficit exists.” “Diesel sorting is a possibility,” he added, according to the Times.
Demand reductions
The US Energy Information Administration estimates that Russia exported 4.7 million barrels of crude oil a day in 2021 – almost half of which went to OECD European countries. The Netherlands, Germany and Poland imported the most Russian oil into the region. Meanwhile, 74% of Russia’s gas exports went to OECD Europe last year, according to the EIA. Implementing policies that reduce public demand for oil could help the UK government reduce its dependence on imported oil, Watson suggested, arguing that boosting public transport absorption and introducing other behavioral policies “concerning people and their choices” is also “definitely possible”. Last year, the panicked petrol market in Britain led to severe shortages that led to many petrol stations drying up, with military personnel being deployed to deliver fuel. But Watson noted that the current situation was different and a more likely outcome to energy supply risks was the continuation of high prices in the UK – a country currently facing the worst cost of living crisis in decades. “I think there is a small challenge to put them [measures] “as top-down policies with the government saying that the population should drive slower, drive less, fly less, move on public transport,” he said.
A “true and effective weapon against Putin”
Earlier this month, the International Energy Agency released a report outlining 10 policies that it said could help reduce global oil demand by 2.7 million barrels a day. The policies, which were intended to be implemented in “advanced economies and beyond”, included a reduction in speed limits on highways by 10 kilometers (6.2 miles) per hour, cheaper public transport, the introduction of car-free Sundays and the switching of private cars to big cities . Rory Stewart, a former British Minister for International Development and a senior fellow at the Jackson Yale Institute, said in a tweet earlier this month that Russia could reduce its oil export revenue by focusing on reducing demand. “It would take government and political effort equivalent to responding to Covid,” he said. His proposed policies, which he said should remain in place throughout the crisis in Ukraine, included lowering the UK speed limit to 50 miles per hour, providing free public transport and appeal to companies like Uber to open technology that would allow free bike sharing. . “This would reduce the demand and the price of Russian oil, [and] “They have a devastating impact on Putin,” Stewart said. Cambridge University Chyong told CNBC that the key to hurting Russia through energy sanctions was to implement policies focused on reducing demand. “This point is about trying to reduce the demand for fossil fuels – this is our real and effective weapon against Vladimir Putin,” he said. “An exponential negative relationship between demand and prices [exists] because at the moment we are facing a very, very tight energy system worldwide and any additional unit of demand will result in a disproportionate rise in prices. “The other side of this effect is that reducing our demand will have a disproportionately high marginal benefit – drastically reducing prices.”
