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Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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Europe’s Energy Crisis Is Reshaping Geopolitics

  • Europe’s energy crisis is fueling a major geopolitical reconfiguration.
  • The IEA is warning that we are currently living through a “global energy crisis of unprecedented depth and complexity,” and that “there is no going back to the way things were.”
  • The financial vulnerabilities emanating out of Europe threaten to destabilize not only some of the more indebted European countries, but also developing nations and net energy importers around the world. 

Europe’s energy crisis is about far more than just energy. It’s also the impetus for a major geopolitical reconfiguration at a global scale. No one knows exactly what the world’s energy and political landscapes will look like when the dust settles (which, by the way, will be years from now) but it’s guaranteed that it will be markedly different than it was the day before Russia – historically the largest exporter of oil and natural gas to the European Union by a long shot – illegally invaded Ukraine. 

This year’s annual energy outlook from the International Energy Agency (IEA) warns that we are currently living through a “global energy crisis of unprecedented depth and complexity,” and that “there is no going back to the way things were” before the unprecedented dual shocks of the novel coronavirus pandemic and Russia’s war in Ukraine. Together, these events have already reconfigured the energy trade worldwide, but the shockwaves to the global economy are just getting started. 

Many look at Europe’s current energy deficit as a kind of heroism, as the European Union has taken a huge economic hit in order to impose energy sanctions on the Kremlin – the one kind of sanction that could really cripple the Russian economy in the hopes of ending the war in Ukraine. “In the struggle to help Ukraine and resist Russian aggression, Europe has displayed unity, grit and a principled willingness to bear enormous costs,” the Economist recently reported.

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But in addition to admiration, Europe’s actions are also cause for major concern. Gas prices are currently six times higher than average rates, and new modeling suggests that a 10% rise in real energy prices is associated with a 0.6% increase in deaths over a typical winter season – that equates to over 100,000 extra deaths of elderly people across Europe in the coming months. 

It’s not only Europe that has to bear those costs. The financial vulnerabilities emanating out of Europe threaten to destabilize not only some of the more indebted European countries, but also developing nations and net energy importers around the world. As always, it’s the poor who will lose out the most, and the global south will inevitably bear an enormous burden from an energy war they had nothing to do with in the first place. While the devastating consequences of the pyrrhic energy war between Russia and Europe are already weighing heavily on consumers around the world, it’s only going to get worse in the next year. 

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The OECD’s recently released flagship annual forecast foresees “a significant slowdown” for the global economy in 2023, decreasing to 2.2%, and then a “little bit of a rebound in 2024” to about 2.7%. For the United States economy, which has been relatively sheltered from the crisis up until now, the outlook is even more grim. The OECD projects that the U.S. economy will grow by just 1.8% this year (compared to 2.2% for the global economy), and a paltry 0.5% next year before ‘recovering’ slightly to achieve a lackluster 1% growth in 2024. We’re clearly headed toward a “brutal economic squeeze” that will be a major stress test for Europe, its allies, and its enemies. 

“There is a growing fear that the recasting of the global energy system, American economic populism and geopolitical rifts threaten the long-run competitiveness of the European Union and non-members, including Britain,” the Economist reports of the enduring effects of the crisis. “It is not just the continent’s prosperity that is at risk, the health of the transatlantic alliance is, too.” Many European leaders have sharply criticized the United States’ protectionist and nationalist energy strategies, including the recent Inflation Reduction Act, which earmarks $400 billion in incentives for U.S.-made energy, manufacturing and transport. 

The current crisis has thrown Europe’s economic vulnerabilities into stark relief. A long-held reliance on cheap fossil fuels from a volatile and aggressive authoritarian turned out to be a dangerous dynamic, unsurprisingly. But the move away from Russian influence is already pushing many nations further into China’s arms, risking the same kind of vulnerabilities and future energy shocks should that nation decide to wield its power over the numerous rare Earth minerals and other clean energy supply chains that it controls almost entirely. The West has allowed China to out-compete and out-innovate them in terms of clean energy technology, and transitioning to clean energy cheaply will be all but impossible in the near term without cozying up to Beijing.

As both the United States and China circle the wagons and lean into protectionist, domestic-first policies, the Economist notes that Europe, “with its quaint insistence on upholding World Trade Organisation rules on free trade, looks like a sucker.”

By Haley Zaremba for Oilprice.com

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Leave a comment
  • Francisco Napoleao on December 06 2022 said:
    A really nice article.

    Allow me to phocus here:

    "Many look at Europe’s current energy deficit as a kind of heroism, as the European Union has taken a huge economic hit in order to impose energy sanctions on the Kremlin"

    This couldn't be more far from the truth.

    There is nothing heroic about this measure, there just an offensive move towards energy producers as a revenge for a energy crisis that was created at large by the EU half year before the war has started.

    Let's be clear, the energy crisis in August 2021 was provoked by the EU surprise "Green Deal", decided unilaterally by the EU without no preoccupation about the consequences it would create on third countries. As world economics jump up in Asia a surge in Natural Gas was felt in developing countries trying to convert to the new european directives, trying to avoid any sanctions accessing the EU's market.

    An anti-russian sentiment was cultivated both in the EU and in the US during all the pandemic time, it was competition because of Sputnik V, it was accusations about the anti-epidemic movements, then about the anti-vaccination movements, Russia become the goat for all sins. Lets not forget the Crimea Platform in 23rd of August 2021, a tactic support of the western countries to the new policy of Ukraine to reject the Minsk II and possible regain by force control over Crimea. From that day anti-russian rhetoric went over the sky. By September Russia was the reason for the energy crisis. Even of they were supplying so much gas to the EU like never before, even if it was clear it was the US producers that were the onesskipping the EU market in favor of the asian gas markets.
    We all know how all that ended up, no need to invert history.


    The EU's price cap was no heroic measure, they intended it to be applied to all oil and gas producers. There is enough material online to confirm it. There is enough leaked information how Norway refused it.
    The Russian experiment is something all energy professionals should be very concerned about. The idea is to learn from the market to try to impose universal caps.
    We have learned from the beginning of this amazing idea how ignorant western politicians are about how the energy markets work. But they learn fast. Be ready!

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