Posted to Energy June 03, 2022 by Alex Cornell du HouxUkraine War 100 Days, and No End in Sight
After 100 days of war in Ukraine, fighting is intensifying and one major factor that gives Russian President Vladimir Putin confidence to continue the war is record-setting oil and gas revenue. As long as there is a market for Russian oil and gas, Putin will have the resources to continue fighting with little hope for meaningful peace negotiations.
The reality is that this war has been going on for the last eight years. The Barack Obama administration made the mistake of not taking the Russian invasion of Ukraine in 2014 seriously. And Europe made the mistake of actually increasing its dependence on Russian gas from 27 percent in 2013 to 38 percent before the current invasion.
Russian oil revenue is up 50 percent this year, according to the International Energy Agency. Gas exports have actually increased during the war. This gives Putin ammunition to fight Ukraine to the tune of more than $700 million a day with an expected $321 billion this year — an increase of more than a third from 2021.
I was on patrol with the Marine infantry in Iraq and we came across a line of cars, trucks and tractors as far as the eye could see. It was nearing dusk and through the desert dust it was hard to make out what they were waiting for. As we got closer it became apparent — oil.
The nightly curfew was approaching and our job was to disperse the crowd. However, people were steadfast and started to riot. They were willing to risk their lives because they were dependent on this single source of energy. Likewise, Putin’s war and autocratic plans are dependent on the Free World using a single source of energy. The late Sen. John McCain famously said, “Russia is a gas station masquerading as a country.”
According to the IEA, in 2021 oil and gas made up 45 percent of Russia’s federal budget, with about 60 percent of exports going to Europe and 20 percent to China. Oil and gas exports have stabilized the Russian ruble. In fact, its sharp and sustained recovery made the ruble the world’s top-performing currency in March. Europe even capitulated to Putin’s demand to pay for oil and gas in rubles to avoid an energy crisis.
Yet Putin’s dependence on a single source of energy also gives us a tremendous opportunity to curtail his power and war in Ukraine. It also means the Free World has an opportunity to increase international security.
Despite the image Putin wants to convey, even before the expanded invasion, Russia was not an economic superpower, ranking 11th in the world. Its gross domestic product ranked above Brazil and was barely comparable to the economy of Texas. Its GDP per capita is 65th in the world. Without oil and gas revenue, the Russian economy will collapse.
The easy answer would be drilling and exporting more oil and gas. It helped make the United States an energy leader. However, it won’t solve this crisis. The industry is already sitting on thousands of unused permits, and investors are unwilling to increase U.S. production due to high profits and previous boom and bust cycles. It would also take six to nine months to increase U.S. production meaningfully. The six liquefied natural gas plants in the United States are already at capacity.
International production is purposefully being held at low pandemic levels by an agreement that is set to expire in September. Additionally, there is little capacity to increase production, as Saudi Arabia is producing 10.5 million barrels per day and has rarely tested sustained production levels above 11 million barrels per day.
The United Arab Emirates is the only other OPEC state that has spare capacity. OPEC is estimated to have less than 2 million barrels per day of spare capacity. Saudi Arabia has also signaled it will stand by Russia as a member of the OPEC+.
Europe also needs 500 billion cubic meters of gas, and 40 percent of that comes from Russia. Even shifting U.S. production from Asia adds only 15 billion cubic meters above the 22 billion cubic meters the U.S. provided last year. Additionally, even with Russian production projected to decline by 17 percent this year and Europe’s reduction of Russian gas to 26 percent, revenues have been stable due to high prices.
The only sustained solution is to add clean energy production to the energy mix, urgently and rapidly. While it takes years and billions of dollars to build a liquefied natural gas plant or pipeline, clean energy can be added much more rapidly to make a meaningful difference on the battlefield. The REPowerEU plan is to invest 210 billion euros by 2027 in clean energy, and Belgium, Denmark, Germany and the Netherlands agreed to a 10-fold increase of wind power in the North Sea. The goal is to reduce Russian oil imports by 90 percent by the end of the year and be free of Russian gas by 2030.
To truly address the urgency of this challenge is to mobilize a wartime effort to produce clean energy at home and export it to Europe. President Biden can invoke the Defense Production Act to lead the world in clean energy solutions. This leverages $650 billion in federal procurement and creates a demand signal for rapid production. America is excellent at manufacturing when we have a mission. We created and led the world in vaccines using the DPA. During World War II we produced 300,000 airplanes.
More than 500 lawmakers, 50 of whom are also veterans, signed the Elected Officials to Protect America letter urging Congress and the president to enact a National Climate Emergency Plan that includes invoking the DPA. Veterans understand the urgency.
Distributed electricity such as local solar is much more resilient to natural disasters, cyberattacks and war. Heat pumps reduce the need for heating with gas. Offshore wind turbines can be producing electricity in 18 months — faster with DPA invoked. Municipal hydro can be added to city water systems in one to eight days, creating baseload energy. Green hydrogen can cut waste and create power.
We can lead the world in clean vehicle production. These are all solutions that exist now. The added benefit of using the DPA to increase energy production is resilience to Chinese economic and military dangers.
The Ukrainian people have shown their strong determination to defend freedom with valor and heartwarming acts. They are on the front lines defending the democratic world. When I was working with the Ukraine special forces and leadership to evacuate Afghan allies, the Ukrainians risked their lives to help us. They believed in helping those who stood for democratic values. Now they are in the fight for their lives and freedom. We must not let them down. Let’s mobilize to defend Ukraine and our planet.
About the Author
Alex Cornell du Houx is a former Maine state lawmaker, president of Elected Officials to Protect America, and political partner at the Truman National Security Project. He wrote this for InsideSources.com.
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