If, as the US Secretary of State Antony Blinken hinted at yesterday, the European continent is set for a Russian-oil-free future, the implications will be enormous.
Energy prices, already high, will spike further. Vast swathes of the continent – and the UK’s – manufacturing sectors will be forced to hike prices too, creating the sort of inflationary pressure that should keep central bankers awake at night. As the weather improves, the impact may not be felt immediately. Though it mightn’t have felt much like it this weekend, spring is on the way. That reduces energy demand at home, so businesses will be sheltered from an immediate increase. But as surely as spring turns into summer, so summer turns into autumn and winter.
In the intervening months the continent – and the UK – will have to rebalance its energy mix at unprecedented pace. The occasionally sclerotic decision-making processes of the EU and coalition politics of our neighbours’ governments seem to have given way so far during this crisis to a fleet-footedness that bodes well. We are not as reliant on Moscow’s whims as the continent, but buying energy on the open market effectively makes that largely redundant in this scenario.
The International Energy Agency report into reducing Russian gas’ importance to the continent is an optimistic and, indeed aggressive blueprint. Analysts are probably right to question it.
So European governments have a choice: either accept that we are too reliant on Russian oil and gas to hit the off button, or prepare their citizens for their own (small, in the grand scheme of things) part in this war effort. If the latter is chosen, then governments need to find their own way to reduce the pain: in the UK at least, we would argue a massive spike in energy costs should be matched by a significant reduction in the tax burden. That the national insurance hike is still due to go ahead in April is barking. But either way, tough choices can no longer be ignored.