A person using a petrol pump at a petrol station in London.
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European countries are facing the possibility of energy supplies being rationed, as a dispute between Moscow and the West over payments for Russian exports rages on.
European countries are heavily dependent on Russian oil and gas deliveries, but Moscow’s invasion of Ukraine in late February saw the EU and the U.K. impose a barrage of sanctions that included cutting down on Russian energy imports.
In early March, the EU pledged to cut Russian gas imports by two-thirds before the end of the year, while Britain has said it will phase out Russian oil imports by the end of 2022.
But those moves come with risks for a region already facing an energy crisis. Tight natural gas supplies saw wholesale prices surge to record highs in Europe last year, with households in Britain due to see their energy bills rise by more than 50% from April 1.
Natural gas rationing
Germany warned on Wednesday that it may soon be facing a natural gas emergency that could necessitate the rationing of gas supplies. German Economy Minister Robert Habeck said the “early warning” measure did not yet mean the country had to resort to rationing gas but called on consumers and companies to reduce their energy consumption.
Meanwhile, Austria’s government announced Wednesday that it had activated the first step of a three-stage emergency plan that would see it monitor the country’s gas market more closely. Officials cited Russia’s demand for payments in rubles as the reason for the triggering of the contingency plan, noting that if it reached the third stage in the plan, emergency control measures such as rationing may come into force.
According to Chi Kong Chyong, director of Cambridge University’s Energy Policy Forum, Germany and Austria may not be alone in having to implement extreme emergency measures if Western countries continue to lock horns with Russia.
Putin said last week that the Kremlin will seek payment in rubles for gas sales from “unfriendly” countries — a demand that has been rejected by the G-7 nations. On Thursday, the Russian leader said he had signed a decree saying foreign buyers must pay in rubles for Russian gas from April 1.
“If they can’t agree on payment terms and gas flow from Russia is stopped, then other European countries will also have to take emergency measures,” Chyong told CNBC. “Despite entering a warmer period when we consume less gas, we still need gas to flow into our storage facilities to use it in the upcoming winter months when temperatures drop and we need gas for heating again.”
“If Russian gas flow stops, all European governments — including the U.K.’s — need to start activating emergency plans including ‘front loading’ public campaigns to ready our citizens to save energy in the winter months,” he added.
Diesel rationing
Meanwhile, Jim Watson, a professor of energy policy and the director of the UCL Institute for Sustainable Resources, said it was “certainly possible” that the U.K. could see a government-imposed rationing of fuel for cars.
Britain faces more difficulty shifting away from Russian oil than it does with moving away from Russian natural gas because it was more reliant on oil imports, Watson told CNBC via telephone.
Speaking to British lawmakers in a meeting of the U.K. Parliament’s Treasury Committee in March, Amrita Sen, director of research at Energy Aspects, warned that sanctions on Russian energy exports could have serious ramifications for Europe.
“Russia has a lot of other intermediaries and other companies that would buy and sell its crude products,” she said. “Particularly in terms of products, diesel is where we fear rationing could come as soon as the end of this month in Germany. You could absolutely see the repercussions of that in the UK as well.”
Meanwhile, Russell Hardy, CEO of Swiss oil trader Vitol, told an FT commodities summit last month: “Europe imports about half of its diesel from Russia and about half of its diesel from the Middle East. That systemic shortfall of diesel is there.”
“Rationing of diesel is a possibility,” he added, according to The Times.
Demand reductions
The U.S. Energy Information Administration estimates that Russia exported 4.7 million barrels of crude oil a day in 2021 — almost half of which went to European OECD countries. The Netherlands, Germany and Poland imported the most Russian oil in the region.
Meanwhile, 74% of Russia’s natural gas exports went to OECD Europe last year, according to the EIA.
Implementing policies that reduce public demand for oil could help the U.K. government to decrease its reliance on imported oil, Watson suggested, arguing that a push toward public transport uptake and the introduction of other behavioral policies “that are about…
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