Driving Down Demand: Responding to the Russia-Ukraine Energy Crisis

Last Updated April 13, 2022

Introduction

As the war in Ukraine worsens, the U.S. and its allies in Europe are moving quickly to reduce their reliance on Russian fossil fuels and speed up their transition to renewable energy. In the short term, however, they are increasingly facing the prospect of a global energy crisis. Swift economic sanctions forced Germany to suspend the Nord Stream 2 pipeline and the European Union to roll out a new plan to slash Russian gas imports by 66 percent by the end of 2022. On the other side of the Atlantic, President Biden issued an Executive Order on March 8, 2022, banning the import of Russian crude oil, Liquified Natural Gas (LNG), and coal. The U.S. and other G7 countries have moved to revoke Russia’s “most favored nation” trade status. 

And on March 28, 2022, President Biden and the European Union (EU) announced a new deal to increase transatlantic gas deliveries and reduce Europe's reliance on Russian energy. Under the agreement, the U.S. committed to supplying Europe with at least 15 billion cubic meters (bcm) of additional LNG by the end of this year, equivalent to around 10 percent of the gas the continent currently receives from Russia. As part of the deal, the EU also pledged to ensure stable demand for U.S. LNG through at least 2030. 

There is unanimous agreement among Western democracies that starving Russia’s economy of oil and gas revenue is a necessary step to weaken Russia’s ability to wage war in Ukraine. But closing off Russian oil and gas is worsening an energy supply and pricing shock in the West, as illustrated by high fuel prices for drivers and homeowners in America and Europe. The single most effective step the U.S. can take to drive down demand for fossil fuels, and apply additional pressure on the Russian economy, is to massively scale up investment in renewable energy and energy efficiency. Such a strategy would buffer the U.S. economy from the price volatility of fossil fuels and help achieve true “energy independence.”