“Well, it's the question that has been debated ever since late February or early March, when it was clear, and particularly from the stance of Berlin, [that there was] no way to renounce Russian energy supply. The German government accepted the coal boycott. That was one of the early sanctions. But they wanted to make sure, ‘please we cannot renounce Russian gas,’” she said, paraphrasing attitudes in German Chancellor Olaf Schotz’s government.
“And you really have to check from country to country. In the case of Germany, Austria, Italy, and some other Central European countries like Hungary, Slovakia, the reliance on Russian pipeline gas is heavy. And it's a different story for a country like Ireland or Portugal. So, it really depends on the energy mix and respective import situation,” she said.
Kneissl noted that “there has been already a legal decision made by the EU as a whole, by the Germans in particular, to renounce fossil [fuels] in general. And it's not only a moral obligation, it's a normative obligation that has been pushing investors out of fossil. So what we actually have been watching for the last, I would say at least three or four years, is what is called underinvestment. There is not enough investment into fossil: one of the factors why we have seen price hikes ever since spring 2021, when the economy was picking up again after one-and-a-half years of lockdowns.”
However, Kneissl said the clock is ticking not just for Russian gas and oil, but for all fossil fuels, as nations make increasingly ambitious commitments to ending the use of pollutive fuels in a bid to slow the pace of global warming. But that transition can’t happen overnight, as the European Union is now attempting to do.
“The question is when,” she said of dropping fossil fuels. “Not this year. Not next year, maybe in 10 or 15 years. And gas has always been presented as the energy of transition, of bridging the gap from the fossil age to a renewable age. That is what the narrative was. For many years, I've been following that topic. So what is happening now is a very hasty, self-imposed renouncement.”
Kneissl recalled the Oil Shock of 1973 and later the 1979 Islamic Revolution in Iran, two previous cases that served as examples of “a crisis triggered by events in a [energy] producing country or several producing countries” that affected energy markets. However, the present situation is “special” for another reason.
“Today we have the customers, so we have the demand side. It's not the supply side, we have the demand side that is boycotting so to say a certain part of the market. And this is special. This is weird, I would say. And the outcome remains to be seen now that China is somehow coming back to the demand side, because we know that the long lockdowns - and this actually helped the market not to go through the roof, because China is the number one oil importer, a very important gas importer - but with its constant lockdowns, the Chinese market was very phlegmatic. And now they are picking up and this will also have an impact. So the European reliance is there and the price uncertainty will be with us. Where [do we] get the gas from?” she asked.
Check out the rest of Kneissl’s sit-down with Sputnik here.