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On Feb. 25, the day after Russia launched a full-scale invasion of Ukraine, European countries and the US paid approximately $700 million to the aggressor in exchange for its natural gas, as they do every day. The global economy can’t simply turn off the spigot from Russia, which supplies 40% of Europe’s gas. Economic sanctions that end up affecting Russian energy companies, however justified, will invariably result in higher electric and gasoline bills for everyone.
For now, there are no good alternatives to replace Russian fossil fuels and thereby cut off president Vladimir Putin’s most important form of leverage—and income. But the crisis could prompt Europe to speed up its adoption of renewable energy. “The fastest way to get an alternative to a gas molecule coming from Russia is to build new wind and solar,” says Rob Barnett, senior energy analyst for Bloomberg Intelligence.
So far, Russian gas exports have not been impacted by the invasion. In crafting sanctions targeting Russian banks, US officials painstakingly carved out exemptions for energy-related deals, to spare the global economy pain. But between sanctions and physical risk to pipelines passing through Ukraine, JPMorgan analysts predict that oil prices, already about $10 higher than they would be otherwise, will rise at least another $10 this quarter.
Higher prices mean more drilling, and US producers are already lining up to come to Europe’s rescue. But the European Union is expected to publish a new energy security strategy next week that will look to renewables, which can be built quickly at ever-plummeting cost, as a means of increasing Europe’s “strategic independence.” Share prices of major European renewable energy companies surged on the day of the invasion.
Ultimately it will be hard to disentangle from Russia, even in a low-carbon economy, given its role as a leading exporter of industrial metals and hydrogen. But Europe’s best defense against energy-market turmoil—not to mention climate change—is a smaller role for fossil fuels.
The backstory
- Europe already had a gas headache. Long before the invasion, a combination of factors had pushed European gas prices through the roof, including competition with Asia for limited shipments of liquified natural gas (LNG) and a pandemic-related deficit of drilling investment. Putin took advantage of this weak spot to give his threats maximum leverage.
- Natural gas is poised to profit. Shipments of LNG from the US to Europe are at record highs, and as oil and gas prices reach dizzying new heights, US fracking companies will see a windfall.
- Russia wants to control clean energy, too. Russia’s stated objective is to control one-fifth of the global market for hydrogen—a potential low- or zero-carbon alternative to fossil fuels in heavy transportation and manufacturing—by 2030. Much of that will be exported to European factories, possibly through some of the same pipelines that today carry natural gas.
One ⛽ thing
US gas prices were high before Russia’s incursion, as demand outstripped supply. Now they’re at the highest levels since 2014—about $3.57 a gallon—and up 30% from this time last year. US president Joe Biden is considering authorizing a release of oil from the Strategic Petroleum Reserve, while some members of Congress are pushing for a suspension of federal gas taxes.
What else to watch for
- Sanctions. It’s too early to tell whether measures imposed by the US, EU, UK and others—designed to choke off Russia’s finances—will make Putin reconsider his tactics. Given China’s support, Russia could find money elsewhere.
- Migration. Thousands are leaving Ukraine. Poland is the obvious initial destination, being next door and in the EU. But the country is also unfriendly to refugees. Meanwhile, thousands of students from countries like Nigeria and India await evacuation.
- Tech fallout. Russia has been engaging in cyberattacks that could block global supply chains, while Russians prepare for their own internet to be shut down. The EU also said its sanctions are partly aimed at limiting Russia’s access to sensitive technology.
- Taking sides. The West is firmly pro-Ukraine, China is backing Russia, much of Africa is silent, and India is hoping for the best. The conflict has economic and political implications far beyond Europe, so it’s no surprise the global response is still evolving.
- Chernobyl. The last thing anyone wants is fighting with heavy weaponry near the site of the worst nuclear disaster in history—a place that’s still highly toxic, and contains dangerous waste. But that’s exactly what happened.
Quartz stories to catch up on
🖥️ How Biden defeated Putin’s disinformation campaign
💸 Why Ukraine wants to ban Russia from SWIFT
🤔 How can the EU freeze assets that Putin doesn’t officially own?
🚇 Kyiv’s subway stations were built for an invasion
🤰 What will become of Ukraine’s booming surrogacy industry?
👂 Kenya’s UN ambassador has the best explanation of the invasion
🙃 The Taliban is calling for peace in Ukraine
A future-focused interlude
It’s been quite a week for adapting and evolving, which makes now a good time to catch up with the first chapter of The Next 10 Years, a Quartz series focused on how companies and industries prepare for a fast-moving future. Here are some questions we’re exploring:
- Is it time to welcome our robot masters? “I’m convinced that robots are becoming sophisticated enough to be the allies and helpful teammates that I hoped for as a child,” a UC Berkeley professor and robotics expert tells us.
- Will live events ever be the same? One CEO of an interactive video company is pumped for hybrid events, “where the audience isn’t just in-person, or just virtual, or just watching on TV, or just in a theater, but all of the above and at the same time.”
- Who are deepfakes for? “You could imagine yourself going to the metaverse cinema to watch Tom Cruise’s Mission Impossible 7 and it’s a fully immersive kind of game,” muses Tom Graham, co-founder of the company behind TikTok sensation Deep Tom Cruise. “And suddenly you’re playing one of the characters, or instead, you take a step back and you become one of the extras.”
Quartz stories to spark conversation
🇨🇳 How China uses taxes to defend its rare earths monopoly
🚗 Why luxury car makers like Porsche remain so profitable
🌴 A pandemic boom made Miami the least affordable US city
💱 India’s advertising council issued crypto guidelines
🔨 China’s tech crackdown may not be over
🚀 Is NASA’s moon rocket ready to take on Elon Musk?
🐛 Would you feed your dog insect-based pet food?
5 great stories from elsewhere
😞 An NFT in desperation. The father of a journalist whose shooting death was broadcast by her killer spent years trying to scrub the clip from social media. “This is the Hail Mary,” Andy Parker tells the Washington Post of his plans to pursue copyright claims after minting the video as a non-fungible token.
😷 The pandemic interpreter. Since April 2020, David Leonhardt has used the New York Times’ morning newsletter to keep 5 million readers informed—and, lately, to argue that covid mitigation efforts are doing more harm than good. New York Magazine details how Leonhardt became a Rorschach test for liberal America.
🛒 The last of the Kmarts. Kmart was once a staple of affordable US shopping, but now it has all but vanished. The Philadelphia Inquirer laments the loss of its own 40+ local Kmarts, and pays tribute to the remaining stores in New Jersey, Long Island, and Miami.
🎧 “People wanted someone to blame.” On an episode of The Deep Dive podcast, The Walrus unwinds the story of a woman who married a crypto entrepreneur, and after his unexpected death, was left with no private key, huge debts, and 76,000 angry investors.
🦴 Kashmir’s sacred professions. Bone-setting, an indigenous healing practice, is getting a revamp. Inverse looks at a new generation of Kashmiri bonesetters, whose blend of ancient knowledge and modern medicine is not only keeping the tradition alive, but attracting new adherents.
Thanks for reading! And don’t hesitate to reach out with comments, questions, or topics you want to know more about.
Best wishes for a safe weekend,
—Tim McDonnell, climate and energy reporter
—Hasit Shah, news editor