Europe is faced with a difficult decision: Should it be worth it to stop oil and gas money from Russia, while it fights in Ukraine?
The U.S. and British bans on Russian oil increase the pressure on Europe to follow suit. However, Europe’s dependence upon Russia for energy makes an immediate embargo difficult. The U.S. and British bans of Russian oil have increased the pressure on Europe to do the same, but Europe’s dependence upon Russia makes an immediate embargo more difficult. Yet, officials claim it is the only way for President Vladimir Putin to stop leaking billions of dollars in oil and gas revenue to his coffers, despite the fact that record inflation is on the horizon.
Europe receives around 40% of its natural gasoline from Russia and 25% of its oil, while the U.S. has very little oil and no natural gases. A EU boycott would result in higher fuel prices and utility bills and eventually, a recession and energy crisis.
The high prices for everything, from food to electricity is partly due to skyrocketing natural gasoline prices in Europe. To compensate for high utility bills, governments have provided subsidies. However, gasoline prices have risen to 2.01 euros per gallon — which is equivalent to $8.33 per gallon. Filling up a small car could cost you 90 euro ($98).
These costs are already reducing consumer spending with inflation at an all-time high 5.8%. What pain can Europeans endure to stop Putin’s attack against Ukraine?
Simone Tagliapietra is an energy policy expert at the Bruegel think-tank in Brussels. “The consequences for the European economy would be significant.” “There would have to be an open, clear, and political decision that we are prepared to compromise our economy, and we are ready to allow a recession to hit Putin where it hurts.”
When he announced the U.S. U.S. President Joe Biden acknowledged this when he announced the U.S.
Because some EU member states are more dependent on Russia than others, it could make it difficult to reach an agreement on a boycott. Germany and Italy heavily rely on Russian natural gas. Poland receives 67% of its oil in Russia, while Ireland only gets 5%.
David Elmes, the head of the Global Energy Research Group of the University of Warwick’s Business School, stated that “it will cause division within Europe” and that one region of Europe could suffer more. “So it’s going put the European political system, the European agreements, and the European project…under an awful lot of stress.”
The European Commission, EU’s executive arm announced Tuesday a plan to remove two-thirds Russian natural gas from the bloc by the end of this year. This includes purchasing more liquefied gas by ship and building renewables faster.
This will be a huge challenge, Mark Rutte, the Netherlands Prime Minister, stated. “We are very dependent, that’s sad reality.”
The EU goal is “a daunting task to achieve.” He said Wednesday that although I doubt we can achieve that goal, he believes we must do all we can to make it happen.
The world is already experiencing an energy crisis, and oil prices have soared to $120 per bar — compared with $76 at end of last year — a European ban on European imports would cause inflation and prices “to the moon”, said Tagliapietra, Bruegel think-tank. Not just for Europe but all energy-consuming countries in the world.
He said that the price effect was what should be considered because it could cause the global economic to go into recession.
Despite the fact that the conflict is getting worse, the flow of refugees, and the heartbreaking images of suffering keep the matter on the table, it’s not going away.
In an online briefing on Tuesday, Caroline Bain, Capital Economics’ chief commodities economist, stated that there is “considerable pressure from both allies and domestically” and that the public would likely back such a move if it didn’t mean too high prices.
Bain expected European nations to adopt a “more measured approach” than a total ban on Russian energy, and “look at how they can reduce significantly their dependence on Russian energy.”
It would be much easier to replace oil, which is mainly delivered by tanker, with natural gas, which comes mostly by fixed pipeline from Russia.
European refineries that convert crude oil into gasoline are built for Russian oil. They would have difficulty switching to other types of oil. According to analysts at S&P Global Platts Russia supplies 14% Europe’s diesel fuel for trucks and many other cars. This would mean that disruptions could “significantly tighten” the market.
Europe made it through the heating season. However, next winter will be a challenge as it must replenish its natural gas reserves.
According to energy analysts at Bruegel, the continent could replace Russian gas up to 10% to 15%. This would require forced rationing, which would impact industrial users first.
The debate over a ban on Russian energy is continuing, despite the possible fallout. Robert Habeck (German economy minister) defended Tuesday’s decision to exempt Russian energy form sanctions. He also noted that U.S officials stated they would “neither ask nor demand” Europe’s largest economy to sign an oil embargo.
However, some German legislators support it.
Boycotting Russian energy is “a difficult decision, but a possible, and therefore necessary one,” stated Norbert Roettgen of the German parliament’s foreign affairs committee for the opposition Christian Democrat conservators.
Dominik Tarczynski is a member of Europe’s parliament for the populist Law and Justice Party of Poland. He said: “The ban against Netflix is a joke because people are dying. So we need to ban Russian oil and gasoline now.”
