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What will be the future of global energy post-Ukraine war?

March 30, 2022 at 2:33 pm

A view from a Shell gas station in Moscow, Russia on 8 March 2022 [Pavel Pavlov/Anadolu Agency]

Ukraine’s President Volodymyr Zelenskyy made a surprise video appearance at Qatar’s Doha Forum last Saturday, stressing the need for the energy-rich nation and others to shift their production from Russian based energy into renewable energy to counteract the loss of Russian energy supplies. This emergency call from the president of the war-torn country was the highlight of the international forum.

What will be the future of global energy when the guns fall silent in Ukraine? Related to Zelenskyy’s call, the US and EU have already started looking for ways to avoid Russia as an energy supplier. US President Joe Biden invited Qatar’s Emir Tamim Bin Hamad Al-Thani to the White House just a week before the Russian invasion of Ukraine. British Prime Minister Boris Johnson has also visited Gulf Countries in an effort to reduce his country’s dependence on Russian energy and thus damage President Vladimir Putin’s energy dominance.

“There’s certainly an understanding that there is an interest for Saudi Arabia — for all oil-producing countries — for the global economy not to be damaged by the current spikes,” Johnson said after his visit.

Johnson was also asked directly by an energy specialist during a press conference if he had reached an agreement with Saudi Arabia. “I think you need to talk to the Saudis about that,” he replied, adding that the Saudis understood “the need to avoid damaging price spikes.” This illustrates the fact that such decisions are in the hands of the Gulf States, with their oil wealth and reserves.

READ: Oil, Iran, Ukraine top agenda as Blinken meets UAE leader

Britain has announced its decision to phase out Russian oil imports by the year end, although Johnson’s visit was a sign of a long-term plan. Even so, Gulf countries are reluctant to compensate for the shortfall in the supply of Russian oil during the war in Ukraine. Neither Saudi Arabia nor the UAE made an official statement after Johnson’s visit. Only the Emirates News Agency (WAM), published a report about a mutual promise to stabilise the energy market.

According to the International Energy Agency (IEA), in 2021 Russia sold Europe 177 billion cubic metres of natural gas, nearly all of it delivered by pipeline. The same volume in 2022 would be worth around €200 billion ($145 billion) at current market prices. Now Europe is experiencing energy turmoil, with spot prices for natural gas surging in the past month to levels five times higher those of a year ago.

While European countries are searching for alternative energy deals, Gulf energy exporters have refused to take sides in Ukraine as fears mount in Europe over Russian gas supplies. This war has created a 21st century energy apocalypse. Like a doomsday scenario, the West jumped from one country to another to secure new sources of energy. This was a reminder of the long food and petrol queues in London and other major capitals in 2020 at the height of the Covid-19 pandemic.

Clearly, Saudi Arabia and the UAE have dashed Europe’s hopes of providing an alternative to Russian hydrocarbons amid the Ukraine crisis, after confirming that they could not provide an increased energy supply to Europe as they want to remain neutral in the conflict.

Despite being a world leader in the export of Liquid Natural Gas (LNG) for over a decade, Qatar’s response to Biden’s plea to help Europe was not encouraging, not least because it simply does not have the necessary volume of LNG to be Europe’s only saviour. Another problem area is infrastructure. No single country, Qatar included, has the pipeline capacity to replace Russia’s Nord Stream 1 and 2 completely.

READ: OPEC+ set for only slight output target increase despite Ukraine – sources

Qatar’s geographic location relative to Asian countries might help its LNG exports to become more competitive than in Europe and the US. A related issue is that of genuine partnership. During the three-and-a-half-year blockade of Qatar by its Gulf neighbours and Egypt, European countries were reluctant to support the government in Doha. Could this be a factor in shaping Qatar’s current policy?

On the question of the current war, it is clear that it will open doors for the development of domestic energy. Although it is very difficult to quit fossil fuels because global economies have been shaped by them since the 19th century, countries will gradually start to rely on their own energy sources to support their economies. For example, Qatar has been a very loyal member of OPEC since 1961 but last year it decided to withdraw from the cartel to boost its own LNG sources. In the new environment created by the war in Ukraine, countries will increase their efforts to nationalise their energy sources in order to gain energy independence.

Ultimately, the Ukraine crisis could prove to be a turning point in global energy consumption. Although difficult, there will be a transition to clean energy. Governments will be forced to make this transition if they want a planet that is safe and clean in the future. Clean energy is affordable and reliable; we can’t afford to wait any longer to free ourselves from the volatility of the fossil fuel market.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.