The Coming End of Fossil Fuel Diplomacy

Events in Ukraine have naturally prompted discussion among Synapse experts on their energy implications, and we decided to share some of that with our readers in a short series of blog posts. This post explores the current marked shift in energy diplomacy, and how this energy crisis differs from previous ones in its emphasis from many quarters on abandoning rather than replacing the fossil fuels that have for so long shaped global relations.

When Russian forces invaded Ukraine, Western world leaders were quick to respond with energy policy. In early March of 2022, the United States banned Russian oil and gas imports, and the United Kingdom committed to a Russian oil phase-out by the end of the year. Even heavily-dependent European countries like Germany announced plans to wean themselves off Russian fuel. Energy markets are still reeling; natural gas prices in Europe remain near record highs, and U.S. gasoline prices have hardly fallen from the new record they set in early March.

The term energy independence always crops up in moments like these, when fossil fuel prices squeeze major world economies. But this moment is no typical energy crisis. For one thing, today's high fossil prices in the West are self-imposed, with full knowledge of the consequences. Additionally, cries for energy independence aren't just leading to more domestic fossil production but have prompted a flurry of new commitments to turn away from fossil energy. These differences signal a turning point in the clean energy transition and the beginning of the end of fossil fuel diplomacy as we know it.

This isn't the first time in the Covid years that energy prices have gone haywire, and it isn't the first time the United States has engaged in a trade war with a global rival. But a self-imposed, fossil-energy price shock is a brand-new phenomenon. By their nature, all trade wars test a nation's tolerance of higher prices in exchange for political and social goals. Willfully turning from Russian fossil fuels in response to its brutal invasion of Ukraine is a clear example of western leaders putting their concern for freedom—for their own nations as well as for Ukraine—ahead of their nations’ interest in cheap fossil energy. As we emerge from the economic winter of Covid-19, that sacrifice is all the more significant.

What's more, turning away from Russian fuel hasn't just led nations to single-mindedly seek other fossil replacements or greater domestic fossil production. In the heat of the moment, it's true that countries—including the United States—are bringing new fossil resources to bear and keeping some old fossil facilities running longer than previously intended. Fossil energy is still a major component of our present energy system. Yet the age-old truth that we can't drill our way to energy independence seems to finally be sinking in.

President Biden's ban on new oil and gas drilling on federal property, which was extended indefinitely just days before the Russian invasion, remains in place. Through the joint European action plan for more affordable, secure, and sustainable energy (REPowerEU), the EU has confirmed its objective to reach independence from Russian fossil fuels by replacing them with "stable, affordable, reliable, and clean energy supplies." By the day, new studies are revealing ways to cut dependence on oil and gas. Even the International Energy Agency, with its original mandate to maintain the stability of the world's oil supply, has released a 10-point plan to reduce oil use. Today, when an economist quips that "the best cure for a high oil price is a high oil price," he voices a snowballing sentiment among political decision-makers that we should leave fossil energy behind for a cheaper alternative, not go drill for more.

This is what a turning point in an energy transition looks like. To make a comparison: economists like to joke that the CEO of Greenpeace should have a picture of John D. Rockefeller on the wall because Standard Oil saved the whales. As the story goes, the rise of Rockefeller's cheap, reliable, plentiful "rock oil" collapsed the whale oil market, ultimately saving whales from extinction. Petroleum's meteoric rise owes at least as much, though, to whalers and energy consumers in general, whose ravenous appetites drove whales to the brink and oil prices sky-high. Those prices created the perfect environment for a new energy source to gain an even greater advantage over the incumbent.

Today's latest fossil price shock is having the same effect. Clean energy has already been doing to fossil fuels what petroleum did to whale oil—the International Energy Agency expects renewables to account for almost 95 percent of the increase in global power capacity through 2026—and today's high prices are only increasing clean energy's advantage. According to TransitionZero, the only thing fossil-reliant countries have to lose is their chains; the economic case for switching from fossil to clean energy is stronger than ever. Throw in the clear national security and ideological reasons to rapidly cut fossil energy use, and new, ambitious clean energy commitments seem an inevitable choice for Western policymakers.

The next step will be to ensure that the short-term crisis response doesn’t lock in emissions that make achieving new climate commitments harder. For the United States, that means carefully handling the tension between maintaining climate ambition and, in the face of a supply vacuum, what may be the greatest opportunity in years to supply liquified natural gas abroad. Already, that tension is on clear display. When the White House announced the goals of the new U.S.-EU Taskforce on Energy Security, delivering “additional liquified natural gas volumes for the EU market […] with increases going forward” was at the top of the list. But further down the page, other goals include developing “immediate recommendations that will reduce overall gas demand” and advancing renewables to displace fossil fuels in general. In this, we see the United States’ dual allegiances as a major consumer and producer of fossil energy. Fossil energy markets offer a tempting tool to gain political and economic influence abroad even as exposure to those same markets pummels consumers at home.

In the long term, achieving energy independence through clean energy will have deep ramifications for international diplomacy and power projection. After all, energy policy was the first tool policymakers reached for to gain leverage over Russia's economy. Without the economic interdependence of fossil energy buyers and sellers, the United States may lose a potent diplomatic tool to wield abroad. But as we've seen time and again, fossil fuel diplomacy cuts both ways. Just as consumers can damage producers by reducing their purchases, producers can damage consumers by adjusting the energy spigot. Today, this dynamic may work in the West's favor by providing a short-term tool to hammer Putin. But since the Arab Oil Embargo of the 1970s, history has proven that fossil price shocks are just as easily—and more often—imposed from the supply side, causing western economies on the receiving end to sputter. Transitioning to clean energy promises to reduce this kind of exposure to foreign influence and will redefine which resources are the focus of global energy diplomacy.