In just two months, the world’s energy priority has changed. Petroleum and natural gas are no longer objects of immediate energy transition to sources of clean energy and have become a matter of energy security.
This Wednesday, the European Union announced plans to be executed in six months to embargo Russian oil and gas and, within a year, refined products. The decision should be ratified by the bloc’s governments in a few days. And this Thursday, Lithuania and Poland inaugurated a 500 km gas pipeline to cut off gas supplies from Russia.
Before the war, no less than 27% of the oil and 40% of the natural gas burned in the European Union was of Russian origin. This strong dependence has become a sensitive security issue to the European Union because Russia has shown that it is not a reliable supplier. It began not only to use oil and gas as a weapon, but also began to use payment instruments to blackmailinsofar as demands payment in rubles to evade economic sanctions that faces.
The decision of the European Union and other neighboring countries is very costly. Go make their energy supply more expensive and demand more sacrifices from the population to save energy. A certain drop in GDP across the region is inevitable – which will have an impact on the entire global economy. It is one more factor that tends to pull up the inflation world.
The assumption is that this radicalization of sanctions will become even more unbearable for Russia, Vladimir Putinwhich made around US$ 120 billion in 2021 with these products.
Radical environmentalists have already started to protest because they understand that the already advanced timetables of replacing fossil energy with renewable sources. And also because this decision obliges the governments of the area to bring back polluting sources, such as coal, or dangerous ones, such as nuclear power plants.
One would imagine that this inversion of priorities is temporary, functioning only for the duration of the war in ukraine. However, the most important perception is that excessive dependence on oil and gas supplies from Russia, the world’s third largest producer, is a force majeure strategic obstacle. Oil and gas revenues are being used by Russia to finance the expansion of territory and therefore to threaten the sovereignty of European countries. And this is a factor that tends to make the policy of reducing energy dependence permanent.
Another consequence of the decision taken will be the increase in investments in oil and gas in other countries, especially in the United States. Brazil can benefit from this diversification as long as it seizes the opportunity.
*CELSO MING IS ECONOMY COMMENTATOR