The earlier world leaders acknowledge that fact, the better it will be for the entire world
But take that conclusion with a grain of salt. Birol, after all, works for the IEA, the OECD energy watchdog. It would be difficult, if not impossible, for Birol to turn a blind eye to political sensitivities in Europe, NATO, and the United States.
According to Birol, energy markets are in for realignment. With Europe, the U.S. and its allies slowly strangling its energy exports, Russia will have to find new markets for its resources.
But it won’t be easy for Russia to replace its European customers because “a big chunk” of Russian gas originates in Western Siberia and flows to Europe via pipelines, Birol said. Building brand-new pipelines to China or India could take up to 10 years, he said, and would need a significant amount of technology and investment.
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“You are not selling onions in the market; you are selling natural gas, “Birol said. “It’s a different business. … to replace the natural gas exports to Europe with Russia is, in the short term, a pipe dream.” He is hundred per cent correct.
But Russia is not the only country in trouble. With winter approaching, Europe, the largest consumer of Russian gas, is facing a dark and bleak season. For it to change suppliers on short notice will not be easy.
Simply replacing Russian gas with LNG is not the answer. LNG prices are rising and becoming unaffordable for many European countries because of soaring demand. Europe cannot afford the high cost of LNG for long. High energy costs have already begun extracting a political price of their own.
Britain is a prime example of the growing crisis there. Rising energy prices are becoming untenable for the UK, as in most other European countries. Two British prime ministers have already lost their jobs over the past few months. How long the current prime minister continues in his position remains a big question mark.
The rising LNG prices are also generating a crisis-like scenario for LNG-dependent, populous countries like Pakistan, Bangladesh and, to some extent, India. It is a real crisis for them, and there is no solution in sight on a global scale.
Parts of Europe have begun conceding that the world needs Russian energy resources and cannot live without them. A couple of weeks back, there were reports of large protests in Prague, with people chanting slogans: ‘Why should ‘we suffer for Zelensky?’
The same sentiments are growing in the UK, as in Germany. With the mid-term elections just a day away, the U.S. is also not immune to it.
Birol is correct when he says: “We are in the middle of the first truly global energy crisis. Our world has never, ever witnessed an energy crisis with this depth and with this complexity,” he said. “In the 1970s, we had an oil crisis, but it was only oil. Now we have oil, natural gas, coal, (and) electricity. The reason is very simple: Russia, the country that invaded Ukraine, is the largest energy exporter in the world.”
The world is watching the war and the emerging energy crisis closely. The war cannot go on forever. The use of cheap drones by Russia seems to have turned the tide against the advancing Ukrainian force. The advance has come to a grinding halt, which means the war is not ending anytime soon.
The costs of the war are going up and up. All, including U.S. President Joe Biden, will need to concede the world needs Russian energy resources.
So, for Fatih Birol to say Russia would be the end loser in this game seems a bit premature. Everyone, including the OECD, will be paying a steep price for this war. The earlier the world leaders acknowledge that fact, the better it will be for the entire world.
Toronto-based Rashid Husain Syed is a respected energy and political analyst. Energy and the Middle East are his areas of focus. Besides writing regularly for major local and global newspapers, Rashid is also a regular speaker at major international conferences. He has provided his perspective on global energy issues to the Department of Energy in Washington and the International Energy Agency in Paris.
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