Opinion | Europe’s Energy Crisis May Get a Lot Worse

Those markets are even tighter.

There’s no extra oil supply in the world at all, as OPEC Plus reminded everyone by saying: No, we’re not going to be increasing production much, and we can’t even if we wanted to.

This was right after President Biden’s in-person appeals.

For all the talk about high gasoline prices and the rhetoric of Putin’s energy price hike, Russia’s oil exports have not fallen very much. If that were to happen — either because the U.S. and Europe forced oil to come off the market to put economic pressure on Putin or because he takes the oil off the market to hurt all of us — oil prices go up enormously.

To, like, $200 a barrel, right?

I mean, it depends how much he takes off the market. We don’t know exactly. If Russia were to cut its oil exports completely, the prices would just skyrocket — to hundreds of dollars a barrel, I think.

That’s because there’s just no extra supply out there today at all. There’s a very little extra supply that the Saudis and the Emiratis can put on the market. And that’s about it. We’ve used the strategic petroleum reserve, and that’s coming to an end in the next several months. There’s just no extra cushion in the oil market right now.

That all starts to look even darker.

We’re heading into a winter where markets might simply not be able to work anymore as the instrument by which you determine supply and demand. Typically you have a market, and prices go to a certain level, and that’s how the markets allocate supply. But if prices just soar to uncontrollable levels, markets are not going to work anymore. You’re going to need governments to step in and decide who gets the scarce energy supplies — how much goes to heating homes, how much goes to industry. There’s going to be a pecking order of different industries, where some industries are deemed more important to the economy than others. And a lot of governments in Europe are putting in place those kinds of emergency plans right now.

Let’s talk about those plans. If Russia really does cut all of Europe off, what does that look like for the people of Europe? What does that shortfall mean on the ground?