The biggest sanction against Russia would be a total embargo on its oil. Europe would be shooting itself in the foot

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On January 20, the OCU confirmed what we had all already noticed in our pockets: gasoline was 24.2% more expensive than a year ago. Between January 11, 2021 and January 11, 2022, the price of diesel had increased by 25.8%. So he half price for gasoline was 1,489 euros/litre and for diesel 1,367 euros/litre.

Almost two months later we looked at those prices with nostalgia. In its latest report, the European Commission raised the gasoline and diesel prices at 1,609 and 1,497 euros/liter, respectively. In other words, gasoline has become more expensive by another 8% since the January record and diesel by 9.51%. Filling a 50-liter tank with 95 gasoline already costs 80.45 euros (15.8 euros more than just a year ago) and 74.85 euros in the case of diesel (16.2 euros more).

But these data pale before the photos of some service stations with gasoline exceeding two euros per liter. And the latest moves they pretend suffocate Russia economically they do not seem to improve the situation in the short term. The United States and the United Kingdom have already confirmed that they will not buy Russian oil. Europe, however, cannot afford it.

the price of freedom

After days of rumors and with Democrats and Republicans supporting the measure, Joe Biden announced yesterday that The United States will stop importing Russian oil. “Defending freedom has a cost, also for us,” she said in the speech in which he announced the new measure. For the United States, Russian oil represents 8% of imports of this product and the ban comes at a time when the average price slightly exceeds one euro per liter, figures that have not been reached since 2008.

For the United Kingdom, Russian gasoline also represents 8% of that used in the country (oil figures are slightly higher). “You can’t just cut off overnight the gas or oil supply coming from Russia,” said Boris Johnson, so the restrictions will progressively advance throughout the year and it will not be until the end of 2022 when the United Kingdom plans to prohibit the total purchase of this fuel from Russia.

Since then, the voices against limiting the purchase of oil and gasoline from Russia in Europe have followed one another. Biden himself acknowledged that Europe might “not be in a position to join” the veto. A situation that has been confirmed by Olaf Scholz, German Chancellor, who confirmed that Germany would not take part in these measures and that “at this time no other way of supplying energy to Europe for the generation of heating, mobility and electricity for industry is possible” .

At the moment, it is estimated that 2 million barrels of Russian crude a day do not find a buyer by the European sanctions but they are figures very far from the 4.5 million barrels per day that Europe buys from Russia. The United States, for its part, has so far purchased some 700,000 barrels per day. And, despite everything, this movement has even led him to build bridges with Venezuela.

“We are going to see increases in gasoline prices in the United States, and in Europe they will see drastic increases, but that is the price of standing on the side of freedom and on the side of the Ukrainian people,” summed up Chris Coons, a Democratic senator, to CNN.

Europe’s dependence on Russia

The words of one and the other have been followed by a new increase in prices of the Brent Barrel, the reference index. Gasoline is already more expensive than ever, despite the fact that the Brent Barrel is still below its all-time high. But with this new growth, the index has today reached €131.64 per barrel. Two days ago, the maximum price stood at 139.13 euros. Those who pointed to a rise to 150 euros per barrel do not seem to be wrong.

But in Bloomberg they already collect that the number of bettors increases at a price of 200 dollars per barrel at the end of the month in the futures market. Why? As simple as Europe has no clear alternative to Russian oil. With the United States and the United Kingdom out of the market, the pressure to take over the barrels from Saudi Arabia and the United Arab Emirates will increase, as both countries have already warned that they will not increase their production forecasts. In other words, there will be more buyers to get hold of fewer barrels on the market.

Zakaria Zayane Le H0l4vocw Unsplash 1

Taking Russian oil out of Europe is giving up 27% of crude which is used every day. A product in which the Old Continent depends on foreign countries by 97%, so it would have no choice but to go to other markets that are even more pressured. In total, 150 million tons of Russian oil are consumed in Europe each year. Some figures that according to Transport & Environment has an impact on a daily income of 285 million dollars (259.18 million euros) to Russia.

In the same way that Europe’s dependence on this oil is a burden to avoid the indirect financing of Russian attacks against Ukraine, these incomes are also essential for Vladimir Putin. So much so that the possibility of not buying oil from Russia has led to a threat from the latter to cut the gas that arrives by Nord Stream I.

90% of European gas comes from abroad and 60% is represented by russian imports which exceed 50% in Germany, Finland, Bulgaria, Slovakia and Hungary. In Latvia and the Czech Republic, all the gas that arrives originates from Russia. But, on the contrary, Europe is also the buyer of 60% of the crude oil that Russia exports and has an even greater weight in the purchase of gas. According Simone Tagliapietraa Bruegel specialist, it is estimated that fossil fuels bring Russia 1,000 million euros a day directly from Europe.

The worst energy crisis since 1973: the invasion of Ukraine has triggered gas by 55% and rising

Therefore, it is no longer only on the table to pay more for diesel and gasoline. Giving up Russian oil could lead to a domino effect costing Europe €200 billion a year, according to Bloomberg. Spending on non-Russian gas alone would already cost an additional 60-100 billion euros per year.

Given the continuous sanctions against Russia as an oil exporter, the International Energy Agency (IEA) warned of a risk that the global energy security was threatened. The plan, release 60 million barrels of reserves which, however, is a plaster on the wound, since it is the volume for one month of the at least two million barrels for which Russia is not finding a buyer.

A transversal solution

Although the need to eliminate Russian dependency in the short term is on the table in the European Union, the truth is that this was already under way, within a framework of caring for the environment and reducing polluting emissions produced by their countries.

Going to markets other than Russia as the only solution does not seem like a viable solution. For this reason, there are voices that point to the fact that he has come to look for greener alternatives and less polluting to the energy we use or even moderate its consumption.

Reduce the gas in your homesreduce the dependence of those who attack Ukraine and let us commit ourselves more to a collective defense”, said Josep Borrell, high representative of the European Union for Foreign Policy. The objective is clear, lower consumption, lower imports and less Russian pressure to put pressure on gas and oil.

What to do with the blades of wind turbines that no longer work?  bridges obviously

According to the IEA, reducing heating by just one degree can cause us to consume 7% less Russian gas. The other immediate application tool is in the nuclear power plants. Keeping them alive will ensure less dependence on gas for electricity production. But given the distant horizon that arises for the construction of new nuclear power plants, there is a much more short-term alternative: the commitment to heat pumps.

Against this background, the European Union has focused its interest on expanding its purchases of Liquefied Natural Gas, a way to open new ways of entering this energy and reduce its enormous dependence on Russia. In this case, The United States is highly interested because it is already the supplier of 30% of the LNG that Europe acquires.

Zbynek Burival V4zyjzj3w4m Unsplash

Another solution is to double down on clean energy. According to Jenny Chase, head of solar analysis at BloombergNEFEurope will generate 28.7 GW of electricity from solar energy, but we have the capacity to reach 45 GW this same year (the goal set for six years ahead). The plans would go through facilitating the installation of solar panels on roofs and increasing the spaces where this energy is exploited, reducing the bureaucracy necessary for its installation.

Also from BloombergNEF they point out that streamlining the procedures for the implementation of wind farms would increase the total volume expected for this year by almost two GW, from 18.9 to 20.8 GW. These are key projects to generate more electricity and achieve the objectives of future European anti-pollution regulations for the automobile sector. The example in this case is Norway, where with 15% of electric vehicles in the car fleet, energy dependence on oil has been reduced by 10% since 2011.

However, despite the fact that the Euro 7 standard will be, in practice, the final goodbye to vehicles powered exclusively by combustion engines, the progress of the electric car in Europe it is slow, with scarce and irregular recharging networks between countries.

Spain is entrusting the takeoff of the electric car to purchase aid.  It will not work

The room for manoeuvre, therefore, of the European Union is limited. Reduce dependency on Russia in oil and gas in the short term involves assuming very high costs in the acquisition of these energies in other markets. The commitment to renewable energies can alleviate the situation a little, but it will not be definitive in the short term. And the use of new nuclear power plants to generate electricity poses a distant horizon in which, moreover, there is no consensus among the member countries.

Photos | Grant Durr, Zakaria Zayan and Zbynek Burival

On January 20, the OCU confirmed what we had all already noticed in our pockets: gasoline was 24.2% more expensive…

On January 20, the OCU confirmed what we had all already noticed in our pockets: gasoline was 24.2% more expensive…

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