How Much Does the West Depend on Russian Energy?
by Bob Shively, Enerdynamics President and Lead Facilitator
“Russia ranks number one, two and three, respectively, among the world’s exporters of natural gas, oil and coal. Europe gets the bulk of its energy from its eastern neighbor. Russia also accounts for half of America’s uranium imports.”
~ The Economist, March 12, 2022
As conditions in the Ukraine turn from bad to worse, we are faced with a bizarre world in which a war on the ground does not stop Russian natural gas transit to Europe via Ukrainian pipelines and where the Ukrainian electric grid remains operationally tied to the Belarusian and Russian transmission grid. Given the situation, is it possible for the U.S. and European Union to stop buying Russian energy?
Let’s look at the realities:
U.S.
- Imports no natural gas from Russia
- Imports minimal amounts of coal from Russia
- Imports about 3% of its oil from Russia
- Imports about half of its uranium supply from Russia or its allies in Kazakhstan and Uzbekistan
Although the bullet about uranium looks alarming, there is plentiful supply of uranium from other sources such as Australia and Canada. We simply import Russian supply because it has been available at a lower price. Similarly, the U.S. can replace Russian oil easily. The key issue is cost. Global demand for both oil and uranium is likely to drive up prices, and for both commodities U.S. users pay a global price. So, while we physically don’t need the Russian supply, its interruption may cause significant price increases. As for natural gas and coal, there is no fundamental reason for these prices to rise much since spare export capacity for U.S. supplies is limited. Thus, prices in North America should not rise much due to global conditions.
Europe Union (EU)
- Imports 40% of its natural gas from Russia
- Imports 46% of its coal from Russia
- Imports 25% of its oil from Russia
- Imports 40% of its uranium from Russia or its allies in Kazakhstan and Uzbekistan
Clearly the EU is very vulnerable to loss of Russian energy supply. The dependence on Russian energy makes it difficult for the EU to fully cut off economic support for Russia. Indeed, it is estimated that the EU pays Russia more than 1 billion euros each day for energy supply. In response to the invasion of the Ukraine, the EU has outlined a plan to cut Russian natural gas imports by two-thirds within a year and to make Europe independent from Russian fossil fuels by 2030. But such efforts will come with significant costs.
We are just beginning to see what appears to be a seismic shift in world energy markets. Could the pain of cutting the Russian connection prove too much and result in the West remaining dependent on cheap Russian supplies? That is likely what Putin is hoping. But after the events of the last two weeks, it appears that Western thinking is changing quickly, and Europe and the U.S. may have the willpower to look elsewhere to satisfy their energy needs.
Want to enhance your understanding of energy markets? Enerdynamics has an extenesive offering of online courses related to electric and natural gas markets. Call 866-765-5432 ext. 700 or email info@enerdynamics.com for more details.
Back to Energy Currents blog
