With Russia supplying around 40 percent of Europe’s natural gas and also being one of the world’s biggest oil exporters, the escalating tensions have laid bare the impact such dependency can have. Oil prices, already constrained by under production by the Organisation of Petroleum Exporting Countries (OPEC), have soared past $110 a barrel while natural gas prices have hit new records. Nigel Pocklington, CEO of Good Energy, described the situation as “overdependence on Russian hydrocarbons coming home to roost.” The chief of one of the UK’s leading renewable energy suppliers believes the situation has put new impetus on renewables as countries re-evaluate their energy supply chains.
He explained: “Renewables offer, in the long term, energy self sufficiency and therefore energy security.
“Renewables are the long term answer here because you reduce your dependency on fossil fuels and fossil fuels tend to be found by and large in parts of the world with authoritarian regimes.”
The challenges of global energy supplies were already being seen before the Russia-Ukraine conflict though, with oil prices climbing as demand soared from economies gearing up again after Covid lockdowns.
During the pandemic, OPEC made cuts to production in an attempt to control prices but despite plans to reverse these cuts and hike production, the group has consistently fallen short of quota.
The situation has caused frustration for countries such as the UK and US who have even resorted to releasing barrels from their strategic reserves in a bid to get more oil to market and control prices.
A similar release of 60 million barrels was recently announced by members of the International Energy Agency as prices were driven yet higher by the Ukraine conflict.
Mr Pocklington commented: “Energy has always been rather inextricably tied to politics and big global events and we’re absolutely seeing that here in that it is Europe’s decision to rely very heavily on Russian hydrocarbons, so gas and oil and coal actually in a lot of cases, that has helped put us in this position.”
He warned the situation had made some countries “tentative” when dealing with Putin where Russia made up almost a majority of their gas consumption.
Some of that tentativeness seems to be disappearing though with Germany halting approval for the Nord Stream 2 pipeline, aimed at supplying Russian gas to Europe via Germany.
Western energy companies have also begun to disengage from Russian operations, with BP offloading its stake in Russian oil giant Rosneft as well as Shell and Norwegian energy firm Equinor also exiting joint ventures in Russia.
Mr Pocklington said: “We can clearly see that the Russian regime is one of the worst examples we’ve seen in Europe for sort of 60-odd years so you really don’t want to be doing business with people who are close to Putin.”
“You can already see British Gas announcing (on Tuesday) that they want to sever links and not buy from Russia and I’m sure that will carry on being the case, just because of the sort of egregious nature of this, and I think consumers and shareholders will demand it as well.”
DON’T MISS:
West faces ‘severe recession’ from Russia-Ukraine conflict [SPOTLIGHT]
EU readies for Russian energy prices to cripple bloc with prices hike [INSIGHT]
Petrol firms accused of profiteering over prices [ANALYSIS]
As countries turn away from Russian energy, a number of alternatives have been discussed.
One option for the UK is fracking, a controversial process used to extract oil and gas from shale rocks deep in the ground.
Business secretary Kwasi Kwarteng has opposed this though, pointing out that UK producers would not sell the gas below market value and adding in a Twitter thread: “We need to move away from gas.”
Mr Pocklington said he agreed with Mr Kwarteng on this and championed the potential for renewable energy in the UK, which he said had a “natural advantage” in this area.
Whatever route is taken, diversification of energy sources is likely to remain a key priority in the wake of the Ukraine conflict, with Mr Kwarteng telling ministers at a recent IEA to reduce exposure to “Putin’s malign influence on gas markets” and help Europe move away from Russia.