By Mark Milke
and Lennie Kaplan
Canadian Energy Centre
One of the more bizarre developments in Europe in recent years has been the twin policy path in which fossil fuels are discouraged in favour of wind and solar energy, but deals are struck with autocracies such as Russia to import more fossil fuel via pipelines.
The net effect of the first policy, obvious in the last few weeks, has been to force European consumers and businesses to pay much more to heat and power their homes and run their businesses. When the wind doesn’t blow and the sun doesn’t shine, backup for the electricity grid is needed. That comes from natural gas or coal, though the latter and nuclear power are increasingly being phased out. That means Europeans pay twice for power.
Combine the coal and nuclear phaseouts with Europe’s political disdain for local exploration for oil and natural gas, such as in 2017 when France proudly banned future exploration for oil and fracking for gas in that country and its overseas territories. Then add parallel attempts to label Canadian oil as dirty, discouraging Canadian exports to Europe.
The outcome is a limited energy supply to meet European demand, resulting in soaring prices.
Natural gas is being used to back up and power Europe’s electricity grid. On electricity prices, for example, Dutch TTF gas (a European benchmark price) has reached as high as €90 (C$130) a megawatt-hour in the last few weeks. That’s up from the €17 (C$24.50) range in January, or five times higher.
Even before the recent rise in electricity prices, an estimated 80 million households across Europe struggled to pay their power bills, with 12 million in arrears. A quintupling of power prices will drive those numbers even higher this winter.
Meanwhile, Europe becomes more dependent on oil and natural gas from regimes hostile to European values, like open societies, liberal democratic norms and tolerance.
Perhaps the best example is the nearly completed Nord Stream 2 pipeline to bring Russian natural gas to Germany and other parts of Europe.
Initially, some European and American politicians opposed the pipeline, rightly fearing it would make the continent more dependent on Russian whims, including the use of energy as a geopolitical weapon.
The concern is legitimate. In 2009, Russia cut off the natural gas supply to Ukraine in mid-winter, ostensibly over a pricing dispute. In reality, it was an attempt to control Ukraine. Ukraine has since arranged to buy natural gas from third-party sources rather than directly from Russia to lessen the Kremlin’s influence.
Beyond the current crisis in natural gas prices in Europe, consider how dependent Europe already is on autocracies and tyrannies for oil.
Between 2005 and 2019, European countries imported over 61.5 billion barrels of crude oil, worth just over €4.6 trillion or about C$6.9 trillion.
Of the €4.6 trillion in foreign oil imports to Europe, €3.1 trillion came from countries with poor records for human freedom – they were tyrannies, autocracies or dictatorships. They were Not Free countries in the language used by Freedom House, a United States-based think-tank that has measured freedom scores for countries worldwide since 1973 and whose data we matched against European Commission data on oil imports.
Just 20 percent of European oil imports came from Free countries, with nine percent from Partly Free countries, and four percent were not measured.
Europe’s Non-Free oil arrived between 2005 and 2019 chiefly from Russia (€1.3 trillion), Saudi Arabia (€343 billion) and Libya (€305 billion).
According to 2019 data, Non-Free crude oil ended up in Italy (404 million barrels worth €26.1 billion), Germany (374 million barrels worth €$23.8 billion) and Spain (277 million barrels worth €17.5 billion).
Europe is tying itself more closely to countries like Russia via Nord Stream 2 and is already highly dependent on autocracies for its oil imports.
Meanwhile, Europe’s policies on renewable energy sources will mean more of the same, including ever-higher prices for European consumers.
Mark Milke and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded in part by taxes paid by industry on carbon emissions. They are authors of EU Foreign Oil Imports from Tyrannies and Autocracies: Nearly €3.1 Trillion (CAD$4.6 Trillion) Since 2005.
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