Russia’s “Special Military Operation” in Ukraine has not only brought back war to European soil but also ignited an economic conflict that has roiled the energy markets.  

European energy crisis

The US and EU agreed to sanction Russian president Vladimir Putin’s incursion into the neighboring sovereign state by placing the country under a wide-ranging embargo. European countries have sought to cut Russia’s revenues and its ability to finance its war in Ukraine by reducing their energy imports from the country. And they are, indeed, in the best position to do so since they are the largest consumers of Russian energy exports and by far the largest contributors to Russia’s energy-related revenues.

The problem is that the energy weapon swings both ways. Since the beginning of the Ukraine war, European countries have tried to limit Russia’s ability to fund its aggression by reducing their dependence on Russian gas and oil.

The G7’s Oil Price Cap

As the latest in a long line of measures, the G7 comprising the US, UK, Canada, Germany France, Italy, and Japan, has imposed a price cap on Russian oil transported by sea.

On the one hand, the cap is supposed to rein in fuel and energy prices. On the other, it can limit Russia’s income and perhaps contribute to putting an end to the senseless bloodshed in Ukraine.

The soaring oil prices in the wake of the invasion ensured that Russia would continue cashing in on its energy exports.

Russia’s Response

In response to the G7’s move, Russian gas stopped flowing through the NorthStream 1 pipeline, putting Europe’s winter energy security in doubt.

In the UK, consumers watch helplessly as the consumer price cap creeps higher. Businesses do not have a price cap to protect them, so they’re in worse trouble than individual consumers, and even the position of the latter is untenable.

We Have a Full-fledged Energy Crisis on Our Hands

Although European governments have been scrambling to diversify away from Russian gas and oil, the odds are stacked against them. Europe’s dependence on Russian gas is profound and well ingrained.

In 2021, Russian gas covered some 40% of the natural gas needs of Europe. Replacing such a hefty share of the gas market on such short notice is impossible.

Many businesses throughout Europe will doubtlessly find themselves forced to fold unless governments can somehow provide effective help. According to, “gas is now the UK’s foremost political and economic problem.”

“The country has a new Prime Minister whose instincts are to avoid handouts, but will nevertheless be forced to give them out.”

Sweden, Finland, and Germany have hit fossil fuel producers with a windfall tax. These governments plan to use the funds resulting from the tax to support the most vulnerable consumers and energy-intensive industries. The prices are already out of control, however. Many have already found that they cannot afford to pay the current bills. According to the Economist, already 14% of UK families are finding it impossible to pay their utility bills on time.

Governments Can’t Tame Inflation

Already rampant inflation is set to flare up again regardless of how governments decide to address the energy crisis. The options on the table are few and unattractive.

A price freeze at the current levels may provide a respite for consumers, but such radically interventionist policies tend to create more significant problems down the road.

While it may postpone the inevitable for individual consumers, a price freeze will force energy suppliers to take on more debt. And in the wake of the Covid-19 crisis, suppliers are already in less-than-ideal shape.

The other options are nationalizing energy producers, imposing windfall taxes, and taking on more debt at the government level.

All these solutions merely kick the can of debt down the road, futilely seeking to escape the inevitable.

Money printing makes these potential solutions possible. And we have gotten so used to it that it will feel natural to fall back on it again. None of that changes reality, however, and nothing warps mathematics. Sooner or later, we will all have to pay for this money-printing.

Whenever the state prints money, it devalues the money already in consumers’ pockets. According to the Bank of England, a 2008-like severe recession is already inevitable. The only question is, for how long can we put it off?

Investing Opportunities

Recessions carry few investment opportunities, but every cloud has a silver lining, and this one won’t be an exception.

Energy producers operating in the North Sea, like BP, Harbor Energy, and Shell, plan to invest more in exploration.

Renewable energy production represents a better investment opportunity than ever before. And the renewable energy market may soon de-link from the traditional fossil fuel market. In 2020, renewable sources covered more than 43% of the UK’s energy consumption. With the world’s largest offshore wind farm connected to the grid, that share will increase further.

Onshore fracking is currently a politically unsustainable solution. As gas shortages pop up, however, the political winds can quickly change in this respect.

As countries like the UK and Germany seek to refresh their energy mix, the discourse about nuclear power may change as well. Although public opinion is currently against the proliferation of nuclear power plants, in the dead of winter, as blackouts bite, that may quickly change.

Such a shift in policy may open investment opportunities in uranium and uranium mining.

How Long Will The Energy Crisis Last?

Governments must step in to tame the energy prices for consumers. In addition to the mentioned measures, they may opt to cut VAT on energy bills. There is but one long-term solution to the problem, however.

On the one hand, European countries must reduce their reliance on fossil fuels. On the other hand, they must wean themselves off of Russian gas and oil. Providing Europe-wide support for insulating homes can also help solve the energy conundrum.

The energy crisis will only end when Europe can cover 100% of its energy needs from sustainable sources without placing its fate in the hands of outside actors who may or may not turn energy into a weapon when the circumstances change.

Most countries are not likely to experience blackouts this winter. That said, some of the worst-case scenarios do expect blackouts to happen in January 2023. Energy bills will continue to creep up for the foreseeable future. And as experience shows, once they go up, they’re not likely to ever come back down. Inflation may eventually catch up with them when they stabilize, making energy bills affordable for everyone again.

What Happens If You Can’t Pay your Energy Bills?

If you live in the UK and find yourself unable to pay your energy bills, contact your supplier immediately and let it know about your predicament. The law compels energy suppliers to work with their clients to find a solution. You may get an affordable payment plan or work out another solution that can help you out.

Do not resort to stopping energy bill payments in protest. In the UK, gas and electricity bills are priority bills. For consumers, this means that energy providers can resort to debt collection agencies in case of non-payment. They will fit prepayment card meters in people’s homes after obtaining a court warrant to enter the premises. In some cases, energy providers can even cut off the supply, leaving people in the dark and without the means to heat their homes in the dead of winter.

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