Some governments seek to cushion the blow for customers and businesses, either through direct aid or by capping prices for consumers and then paying the difference to energy providers. But with inflation in many countries well above target and already large budget deficits due to emergency spending during the Covid-19 pandemic, the possibility of cushioning the impact is more limited than early in 2020. Rising inflation triggered increases in short-term interest rates in many countries, slowing economic growth.
Europeans have rushed to increase gas imports from alternative producers such as Algeria, Norway and Azerbaijan. Several countries have resumed or extended the use of coal for electricity generation, and some are extending the life of nuclear power plants scheduled for decommissioning. EU members also introduced gas storage obligations and agreed on voluntary targets to reduce demand for gas and electricity by 15% this winter through efficiency measures, greater use of renewable energy and support for efficiency improvements.
In order to ensure an adequate supply of oil, the IEA and its members have responded with both greatest releases ever emergency oil stocks. Through two decisions – on March 1, 2022 and April 1 – the IEA coordinated the release of some 182 million barrels of emergency oil from public stocks or mandatory stocks held by industry. Some IEA member countries have independently released additional public stocks, resulting in the release of a total of over 240 million barrels between March and November 2022.
The IEA has also published action plans for reduce oil consumption with immediate impact, as well as plans for how Europe can reduce dependence about Russian gas and how ordinary citizens can reduce their energy consumption.
The invasion triggered a reassessment of energy policies and priorities, questioning the viability of decades of infrastructure and investment decisions, and profoundly reorienting international energy trade. Gas was expected to play a key role in many countries as a low-emission “bridge” between dirtier fossil fuels and renewables. But the current crisis has called into question the reliability of natural gas.
The current crisis could accelerate the deployment of cleaner and more sustainable renewables such as wind and solar, just as the oil shocks of the 1970s spurred major advances in energy efficiency, as well as nuclear power , solar and wind. The crisis has also highlighted the importance of investing in robust gas and electricity network infrastructure to better integrate regional markets. The EU’s RePowerEU, introduced in May 2022 and the US Inflation Reduction Act, adopted in August 2022, both contain major initiatives to develop energy efficiency and promote renewable energies.