The West’s own myopia led us to this energy crisis

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The Group of Seven summit that begins Sunday in Germany will be all about fossil fuels amid a global energy crisis unseen in nearly five decades. The G7 leaders will talk a lot about the need to ramp up production of oil and gas in order to address energy shortages, and rates of inflation, that are making the 2020s look a lot like the 1970s.

Once again, war has served as the catalyst for a crisis whose underlying causes have to do with the complacency of Western governments in the face of shifting geopolitical dynamics. The Arab oil embargo against countries that supported Israel during the 1973 Yom Kippur War caught the world flat-footed. Unfortunately, the painful lessons of that era had been forgotten or dismissed in favour of the West’s “clean-energy” orthodoxy by the time Russia invaded Ukraine in February.

In the years leading up to the invasion, Western European politicians allowed their countries to become increasingly dependent on Russian natural gas because they considered it the lesser of two evils. The alternative was importing North American liquefied natural gas (LNG) derived from hydraulic fracturing, or fracking. Besides, they insisted, it was only a matter of time before abundant wind and solar power, and electric cars, would eliminate the need for all fossil fuels.

Policy-makers in Canada made much the same call. At one time, more than a dozen proposals for LNG export terminals were on the drawing board in this country. Instead of incentivizing their construction in the name of exporting LNG to favour a transition away from much-dirtier coal in China and Europe, and reducing energy dependence on authoritarian and undemocratic regimes, Ottawa erected additional barriers to their realization. The result is that only one such project is now under construction, and it still faces major hurdles before it is up and running.

Well, guess what? Europe’s scramble to displace Russian gas has led U.S. LNG producers to divert their limited supplies from China to Europe. Beijing has responded by replacing gas with coal, ordering the country’s coal mines to ramp up production of the fossil fuel that already supplied 60 per cent of China’s electricity before the invasion of Ukraine. China has also moved to import more low-quality coal from Indonesia and Mongolia, meaning it needs to burn more of the stuff just to produce the same amount of electricity that came from using higher-quality thermal coal.

Germany, meanwhile, is poised to ration power and restart idled coal plants as Russia cuts off its supply of natural gas. Russia blames the 60-per-cent reduction in gas flowing to Germany via the Nord Stream 1 pipeline on Western sanctions that prevent the return of a turbine under repair by the Canadian unit of Siemens Energy. But German economy minister Robert Habeck rejects that excuse, saying Russia is squeezing its gas supply “as a weapon against Germany.”

U.S. President Joe Biden, who as a White House candidate vowed to make Saudi Arabia a “pariah” state, is set to visit that country next month to appeal to leaders there to increase oil production to help drive down crude prices that have sent the cost of gasoline to more than US$5 a gallon at the pump. Such grovelling might have been partially avoided had former president Barack Obama, under whom Mr. Biden served as vice-president, not vetoed the Keystone pipeline in 2015.

This week, Mr. Biden’s Treasury Secretary, Janet Yellen, pooh-poohed the idea of resuscitating Keystone in case, you know, this energy crisis goes on for a while. “I don’t see it as a short-term measure to address the current situation,” she said after meeting in Toronto with Finance Minister Chrystia Freeland, who insisted she had raised the matter privately with her U.S. counterpart. “And longer term, we remain committed to our climate-change objectives.”

Except that, in focusing too narrowly on those objectives, the West has allowed Mr. Putin and the Organization of Petroleum Exporting Countries to wield too much power over the global energy market.

It would be a mistake to assume this current crisis is a temporary setback in the midst of a transition to non-carbon-emitting energy sources that is already under way. Rather, it may be a taste of what’s to come unless the West puts energy security on an equal footing with global warming. Allowing thugs and autocrats to hold the West hostage should not be the price to pay for cutting global carbon emissions.

Surging fossil fuel prices have filled Russia’s coffers, allowing President Vladimir Putin to claim that sanctions against his country have backfired. “Gloomy predictions about Russia’s economy didn’t come true,” he said last week. “European countries dealt a blow to their own economy all on their own.”

That comment is only partly true. But that it has any truth at all is a testament to the West’s energy myopia.

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