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⚡ "Russia’s War Hits Energy Markets Hard"

The Carbon Copy

Photo by Ussama Azam / Unsplash

Table of Contents

Host: Stephen Lacey
Guests: Pierre Noël | Global Research Scholar | Center on Global Energy Policy & Amy Myers Jaffe | Managing Director | Climate Policy Lab
Category: ⚡ Energy

Podcast’s Essential Bites:

[0:58] SL: “There are a few moments in recent history that have brought sweeping change to energy markets and energy policy. The oil shocks of the 1970s, the Chernobyl disaster in 1986, the 2008 financial crisis, the Fukushima nuclear meltdown in 2011 and then most recently, the COVID pandemic. We can now add Russia's invasion of Ukraine to the list. So much of this war is tied up in energy. Russia is one of the biggest fossil fuel producers in the world. Europe, which depends on Russia for 40% of its gas for heating, and one quarter of its oil, is now considering a future without those resources.”

[1:32] SL: “Sanctions that cut off Russia from the global financial system have so far spared energy. But then the traders and governments that buy Russian oil just stop buying it. Western oil companies like BP, Shell, Exxon, have abandoned operations in the country. And now global oil prices have risen to highs not seen since 14 years ago. And record high gas prices are on their way. This is happening at a very bad time. When tight energy supplies related to COVID disruptions have pushed prices up and up and up.”

[2:04] SL: “The spike in natural gas prices will make coal more competitive, keeping a lot more dirty energy on the grid for longer. Operators of nuclear power plants are concerned about high uranium prices or even a supply shortage, depending on how deep sanctions go. Just days ago, Russia shelled Europe's biggest nuclear power plant in desperation, which could have created an incomprehensible disaster for the region. Joe Biden is probably going to spend the coming months talking about increasing fossil fuel supply to moderate high prices at a point when he really wanted to talk about cutting it to address climate change. In his State of the Union address last week, he barely even mentioned climate. […] People are calling Russia's invasion of Ukraine a breakdown of the post cold war order. And it's also a breakdown, or at least a massive rearrangement in the current energy order. We are in new territory here.

[5:57] PN: “[Europe] […] would not cope satisfactorily [without Russian gas]. […] In some countries of Europe, and it's difficult to know exactly where, the supply of energy, whether it's natural gas, or whether it's electricity, or whether it's heat, would have to be rationed. Some homes and businesses would not get the final energy that they expect and that they have contracted for.”

[7:30] PN: “I don't see Russia weaponizing energy here. If anything, they need the money more than ever. […] It's going to be a long term confrontation, their economy will go down the drain. They need […] energy export revenues more than ever. But also, if they were to cut off Europe, surely they would even more […] unite everybody against them. I am surprised that the governments have really paid great attention not to make energy impulse impossible or not to meddle with the financial architecture behind the energy impulse. […] We would not get anything out of cutting ourselves off from Russia now. And we would create a short term severe energy security problem for [Europe] that doesn't make it easier to solve our long term energy security problem.”

[9:58] PN: “In Europe, because we price carbon through a cap and trade regime, we have somewhat dented this comeback of coal at the cost of an even more pronounced increase in our electricity prices. But in Asia, you see the same as you see in the US, coal is back against natural gas. This is going to be aggravated by the crisis. This is just about the worst possible market situation regarding your climate change objectives and the few years ahead where we were supposed to dramatically accelerate the phasing out of coal. […] This is something that, at least in Europe, will be a major driver of energy policy going forward.”

[13:26] AMJ: “ In Europe, natural gas prices in certain countries have never ever been this high. We're talking about enormous shock for customers of heating oil, for industry, for individual homeowners. And then you're adding on top that […] the price of oil [going] above 100€ for Europe. […] Here in the United States, we're in a bit of a better position. […] We're getting a lot of revenue from our exports. And that's helping our balance of payments for the few imports that we're making. And a lot of our imports come from Mexico and Canada. So good news. But, it's a global crisis. […] We still have to deal with the fact that the whole global economy is going to be torn asunder by the fact that we're gonna have this unbelievable escalation in oil prices and natural gas prices in some locations.”

[19:04] AMJ: “We're in a totally new energy world. […] A shock like this is going to make countries double down on creating energy in a way that they have more control [of]. And that's […] for the most part renewable energy.”

[20:59] PN: “The short term is bad, […] but […] whatever is done, to wean ourselves off Russian natural gas will be leveraged to accelerate our decarbonisation objective. So in that sense, it's positive. Governments in Europe will be empowered, potentially dramatically so, to accelerate the transformation of our energy systems.”

Rating: ⚡⚡⚡⚡

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🕰️ 24 min | 🗓️ 03/08/2022
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