Is Putin Weaponizing Europe's Fossil Fuel Dependency

If Vladimir Putin uses the oil and gas reserves he controls to their full strategically destructive potential, the world's economies that rely on fossil fuels could be destroyed.

Just a few weeks ago, JP Morgan issued a dire warning about the impending collapse of the global economy. Yet, the news barely made headlines anywhere outside the financial press. It has been speculated that the world economy would suffer such a severe blow if Russia suddenly ceased exporting oil, perhaps leading to a fourfold increase in the price of oil to around $400 per barrel. All oil exports were a critical factor in this forecast that Russia would halt.

Right now, a barrel costs roughly $96.

The global economy would be jolted even more severely than in the 1970s, leading to a deep recession in the United States. This is because there is still a substantial reliance on oil worldwide. Russia halted natural gas exports to Europe this week via the Nordstream 1 pipeline. This was done in accordance with a predetermined maintenance schedule. The German government is very worried that Russia would completely cut off the water supply, even if only for a short period.

Putin has already begun to decrease gas supply to Europe in recent months, steadily increasing prices. It is simple to foresee the disastrous outcomes that could result from this scenario. Western European officials are understandably worried that Russia may deliberately delay the resumption of gas supplies or even keep them shut off in retaliation for the sanctions imposed on Russia and the military aid provided to Ukraine by the West.

If European countries stick to their current energy policy, this problem will worsen dramatically. Over 38% of the natural gas imported by the 27 countries that make up the European Union comes from Russia. Without a new energy policy, by 2040, between 50 and 60 percent of all gas imports will have to come from Russia. This is because numerous European countries intend to phase out nuclear power generation, the European Union aims to minimize greenhouse gas emissions by decreasing coal consumption, and domestic gas supplies are running low.

Due to their increasing reliance on Russian natural gas imports, the European Union and the rest of Europe may soon be in a very precarious scenario.

Germany's gas reserves are now at roughly 64% capacity. As part of its emergency plan, that number must be increased to 90% by the end of December. Stage three of Germany's emergency plan involves the government seizing control of gas distribution and instituting rationing measures if Russia cannot maintain normal supply levels.

The pricing of oil and gas are determined on an international scale, and Russia is a preeminent player in that market. In the wake of its invasion of Ukraine, Russia has reaped billions of euros in additional payments for oil and gas. The reason for this is because there has been an increase in cost.

A prohibition on exports from Russia would immediately send prices to "stratospheric" levels, according to JP Morgan, because global supplies are already at their maximum capacity.

While the United States is self-sufficient and has ample supplies, Europe still relies on Russia for its supply needs. The economies of Germany and Italy, in particular, would be severely harmed by increases in the cost of energy, and thousands of businesses would be forced to shut their doors.

The cost of people's energy bills would increase to unaffordable levels, and millions of people would lose their jobs as a result. Millions of people would find it financially impossible to own cars or cook their own food.

Putin has already begun to weaponize nonrenewable energy sources.

Recently, he threatened to cut off gas supplies to a number of European countries if they did not pay him in rubles. As a result, they were eventually forced to give in. In addition, he has been preventing the shipment of food from Ukraine, which has driven up prices everywhere else.

As stated by Bloomberg News, natural gas is quickly becoming a competitor to oil in terms of its influence on geopolitics, and there isn't enough of it to go around.

Putin's decision to suddenly cut off supply would have a devastating impact on the economies of the countries that are dependent on oil and gas. Although others believe it would be unwise for him to cut off his own source of income, the Russian government has accumulated a considerable cash reserve to assist protect against the possibility of such a scenario. In addition, Putin is running out of time: Germany has announced that it intends to cease its reliance on Russia by the beginning of the following year.

Concerned about a potential decrease in supplies from Russia, Germany activated the second level of the three-stage gas emergency plan it had in place one month ago. In this "alert stage," the German federal government warned its citizens and local governments to prepare for an increase in the cost of gasoline by reducing their overall gas consumption as much as possible. In addition, they urged citizens to reduce their gas consumption to the greatest extent possible.

Currently, Germany's gas reserves are around 64 percent full. Still, as part of its emergency plan, it has to have that number up to 90 percent by the end of December. Suppose it cannot do so and Russia cuts off all supplies. In that case, the German government will be compelled to activate stage three of its emergency plan, which will involve taking control of the distribution of gas and implementing rationing measures.

Poland, Bulgaria, the Netherlands, Denmark, and Finland are the countries that have had their gas supply cut off by Russia as a result of their refusal to comply with Russia's order that they make payments using a bank account denominated in rubles.

Robert Habeck, the German minister responsible for economic affairs, referred to the situation as a "gas catastrophe" and accused Vladimir Putin of purposefully launching an economic assault against Germany. A day later, Habeck warned that industry shutdowns could possibly lead to job losses if gas reserves run low during the winter. He added that a further drop in supplies from Russia could cause a collapse of Europe's energy sector similar to the one that occurred in 2008 with Lehman Brothers.

Suppose Putin's policy is allowed to continue. In that case, stock markets may crash, and thousands of businesses will fail because they cannot afford their energy supplies, resulting in the loss of jobs for millions of people.

The Western world's governments might issue urgent decrees to accelerate the development of solar and wind energy on an industrial scale.

They could make the installation of new solar and wind farms much quicker, particularly on land, which is where most of these farms are located.

The most time-consuming part of the process, in terms of both cost and duration, is applying for and receiving necessary approvals and clearances.

Removing fossil fuel from our energy supply would need the rapid construction of a large number of solar and wind farms, which would relieve some of the demand on gas supplies, which are required for heating and cooking.

Additionally, we had the ability to increase incentives for the purchase of electric vehicles, which would have decreased our reliance on oil imported from other countries.

Instead, western governments have displayed an astounding lack of foresight over the entirety of this battle. We have spent the past few months putting a greater emphasis on acquiring additional oil and gas supplies. Any fresh investments made into new oil or gas fields – which we do not control – would not bring these fields online quickly enough. The discovery and development of a new oil or gas resource can take as long as ten years.

Because of our political systems acceptance of bribes and reelection donations and the interest groups' willingness to motivate the geopolitical decisions with hard cash, oil and gas lobbyists significantly increased our reliance on fossil fuels.

The clock is ticking down, not just for Putin but also for Europe. Time is running out. Not only do we need to recognize the threat that Putin poses to us, but also the threat that comes from Putin's most potent weapons, which are his oil and gas supply.

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