Europe’s Energy Crisis Won’t Be Over Anytime Soon, Experts Say
Russia’s invasion of Ukraine quickly laid bare Europe’s dependence on Russian energy. But solving the matter could take years, experts say.
Worse still, the EU and UK will likely suffer economic turmoil while the situation rights itself.
First, OPEC seems to have no desire to pump more oil to help moderate crude price. The price of a barrel of Brent crude oil recently fetched $100 up from approximately $72 a year ago, according to data from TradingEconomics.
Historically, high prices, those above $80, have prompted a response of increased supply by producers. But not this time. And it doesn’t look likely to happen any time soon.
No Likely Oil Supply Increase
OPEC, which controls the lions share of oil production wants to keep oil prices at around $100 for as long as possible, according to a recent report from geopolitical consulting company EurasiaGroup, “oil prices have jumped, with front-month Brent trading above USD 100 per barrel, following comments last week by Saudi Energy Minister Prince Abdulaziz bin Salman hinting that OPEC+ might cut production to stabilize prices […] The references to cutting production suggest that the kingdom would like to extend this bonanza as long as possible, with about USD 100 per barrel as its ideal Brent price level, at least for the time being.”
In addition, Wall Street wants Big Oil to stop spending on new projects. Part of the reasoning is that investors don’t see a good future for fossil fuels. Still, it means that mothballed gas and oil wells are not being brought back into production. And of course, that means energy supply is not increasing enough to moderate prices.
Eye-Popping Energy Prices To Hit Europe
Europe’s reliance on Russian energy, oil and natural gas, combined with sanctions on the Kremlin is crushing Europe’s economy. The EU’s economy already grows far slower than does the U.S. so it won’t take much to push the bloc into recession.
Worse still, it looks like the situation won’t be solved any time soon, according to a recent note from the Lead Lag Report, “[the] energy crisis in Europe is looking more and more like it could be a years-long battle and OPEC doesn’t seem interested in lifting production quotas to suppress risk.”
That’s probably going mean profits suffer in the bloc for a while. Investors be warned.
This is an edited version of a story first published on Forbes.com on August 30, 2022