Are Europe threatened with power outages? Analysts warn of energy shortages due to Russia embargo

Failure of Russian ls can hardly be compensated globally
Alternative forms of energy are not enough
Federal Minister of Economics Habeck against Russia embargo

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Analysts warn CNBC that, at least in the short to medium term, increased production volumes by other oil exporters would not be enough to satisfy the world’s thirst for energy in the event of an embargo on Russia. The capacities of renewable energy are not yet sufficiently developed to compensate for the complete loss of supply of Russian oil. With this assessment, however, a distinction must be made between the various regions of the world: while the USA, which imposed an oil embargo on Russia last week, could do well without Russian oil, the European states would have to reckon with a considerable energy shortage, at least in the coming months.

OPEC will only partially compensate for Russian oil

Russia is the world’s third largest oil producer after the USA and Saudi Arabia and has so far exported more than half of its production. The EU gets 43 percent of its gas and 25 percent of its oil from Russia. Dependence on Russia is particularly high in Germany: in 2020, Germany imported 34 percent of its oil and even 55 percent of its gas from Russia. Hungary, Italy and the Baltic States also import large quantities of gas and oil from Russia. As a result, many Western countries would quickly have to increase import volumes from other producing countries if there were an embargo on Russia. Vandana Hari, founder of the energy agency Vanda Insights, predicts to CNBC that only two of the total of five million barrels of crude a day that Russia previously exported could be replaced by an increase in production from other oil countries. But even for that, Saudi Arabia, Iraq, Kuwait and the United Arab Emirates would have to “increase production to maximum capacity at the same time,” says Vandani. This, in turn, would require the Organization of the Oil Exporting Countries (OPEC) to change its production quota system, since the production volumes are still heavily prescribed for pricing reasons. However, the member states of OPEC have not yet been able to agree on a significant increase in production volumes.

U-turn: US interested in Venezuela’s l

According to the US Energy Information Administration, eight percent of American oil imports came from Russia in 2020. Thanks to increased domestic production volumes, the USA is less affected by the Russia embargo. But the US will also have to look for alternatives to replace Russian gas. The Americans have therefore recently become interested in Venezuelan oil, which they sanctioned in 2019 due to human rights violations and election fraud in Venezuela. According to information from Reuters, the US is currently considering easing oil sanctions on the condition that Venezuela exports its oil directly to the US. But Vandani emphasizes that Venezuelan oil “wouldn’t even come close to compensating for the disruption in Russian supplies.” Certainly the best alternative to Russian oil are therefore renewable energy sources.

Renewable forms of energy cannot yet replace oil

Regina Mayor, head of the energy sector at KPMG in the USA, expects a fundamental change in the energy infrastructure, away from fossil fuels and towards renewable forms of energy, “very soon”. Although oil and gas would remain essential for energy stability, the raw material turbulence of the past few weeks had once again underpinned the importance of alternative forms of energy. For this reason, the shares of some clean energy companies such as Nordex, Vestas or Plug Power jumped up on the stock exchange, where, as is well known, the future is traded. But there is no doubt that renewable forms of energy will not be sufficient to meet global energy demand, at least in the next few years.

Habeck warns of an economic slump in the event of an embargo

So does a Russia embargo threaten Europe with power cuts? Analyst Hari formulates it drastically: If Russian energy supplies are actually cut off completely, it would mean “lights out” in Europe. Economics Minister Robert Habeck (Die Grünen) recently warned in the ZDF program heute journal that there would be “severe economic damage” if an energy embargo were imposed on Russia. According to Habeck, it is therefore a matter of freeing oneself “from the bracket of Russian imports” as quickly as possible. Germany is currently working flat out to reduce its dependency on Russian supplies. The Green politician has given positive signals in the last few days and, according to an article by Merkur, believes it is possible that Germany will be completely independent of Russian oil imports by the end of 2022. This means that Germany will probably import less and less gas and oil from Russia in the coming years, even without an embargo.

Editorial office finanzen.net

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