Russia’s invasion of Ukraine has upended energy security around the world, plunging many countries into an energy crisis that industry leaders fear will last for years.
Russia was one of the world’s largest suppliers of oil and natural gas before the war, but eroding tensions with the West following the invasion disrupted energy markets around the world .
Russia was Europe’s largest oil and gas supplier last year, and Russian President Vladimir Putin capitalized on that dependence last summer when he began limiting natural gas flows to Europe, triggering an energy emergency on the continent. Europe’s ensuing rush for alternative supplies from the United States and the Middle East has had a global ripple effect by redirecting natural gas flows once destined for developing countries, where an energy crisis still worse is happening right now.
The International Energy Agency, an industry watchdog, has called the global energy crisis “unprecedented” in its depth and complexity while predicting weak supply and uncertain markets through 2023 in less, and the leaders of the world’s largest energy companies seem to agree.
“Things are extremely turbulent, as they have been all year,” Francesco Starace, CEO of Italy-based energy company Enel, one of Europe’s largest, told CNBC on Tuesday. a conference in London.
“The turbulence that we are going to have will remain. It might change the pattern a bit, but we are looking at a year or two of extreme volatility in the energy markets,” he said.
Indefinite insecurity
Starace’s comments came as northern countries enter their heating season, when energy demand is highest and markets are most exposed.
Tight global energy supplies have already led to power cuts in countries like Pakistan and Bangladesh, while energy-intensive industries in Europe such as fertilizer and steel makers have had to cut production. But early fears that Europeans could freeze in their homes this fall and winter due to scarce fuel supplies have so far been dashed by unusually warm weather, low energy consumption and rapid replenishment of fuel. natural gas reserves despite limited supplies from Russia.
But with energy markets set to remain volatile for the foreseeable future, Europe’s energy crisis could last much longer than this winter as Russian gas supplies continue to fall and demand from countries like China , where energy consumption is down due to COVID lockdowns, could rebound .
Starace warned that while Europe may be able to ride out a severe crisis this winter, the same will not be the case next year.
“I think we’ll overwinter because of all the storage we’ve been able to fill, and then we’ll find out that we’ll have to fill storage for next winter… without Russian gas,” he said.
“Let’s not forget that we had [Russian gas] in 22 – less and less – but we had it,” Starace said. “Too much has to happen for next winter to be safe.”
The IEA warned earlier this month that Russian gas flows to Europe could continue to halve their current volume by next year and potentially “stop altogether”, while warning that filling storage for next winter would be more difficult for European countries.
The long view
Starace said the only long-term option for Europe and other countries facing an energy crisis is to reduce consumption.
Europe will have to save gas “whenever we can, consume less of it, get rid of those gas uses that don’t make sense and leave it to the industry that needs it,” Starace said. He added that figuring out how to reduce energy consumption would be the “big fight” to focus on in 2023.
To maintain supply and maintain price stability, European Union member countries agreed in September to voluntarily reduce their electricity consumption by 10% by March 2023, in addition to a mandatory target of 5 % during peak hours.
But moderation of energy consumption will probably have to become a long-term habit for Europe. The continent’s energy crisis represents a “unique opportunity for Europe to really reshape its energy demand and reassess the way it consumes energy”, said Tatiana Mitrova, a research fellow at the University’s Center on Global Energy Policy. of Columbia. Fortune in October.
“These are habits that need to change anyway if we are serious about climate goals, but now they will be forced by extremely high energy bills,” she said.
Last month, the IEA predicted that the energy crisis could be the spark for a more aggressive shift in fossil fuel consumption. The agency noted that renewable energy sources have played only a “marginal role” in driving up electricity costs around the world, while fuel sources, including natural gas, have is doubling or even tripling utility bills in Europe this year.
In September, Enel’s Starace told CNBC that European countries could use the energy crisis to reduce their consumption of fossil fuels and turn to renewable energy, after previously saying that burning gas to generate electricity was “dumb”.
“I think we’ve finally figured out how addicted we are to gas, how insane this addiction is and how we can solve this problem,” he said, adding that “the economy can work much better , depending much less on fossil fuels, than people”. think.”
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