Helen Thompson
Says More…
This week in Say More, PS talks with Helen Thompson, Professor of Political Economy at the University of Cambridge and the author of Disorder: Hard Times in the 21st Century.
Project Syndicate: Europe has vowed to wean itself off Russian energy. But, as you point out in your book, Disorder: Hard Times in the 21st Century, Europe’s dependency on Russian oil and gas dates back to the Cold War, and you recently noted that the energy relationship with Germany “proved robust through six decades of shifting US-Soviet and later US-Russia relations.” This suggests that energy policy has not always adhered to geopolitical or ideological rules of engagement. But the Ukraine war seems to have shown otherwise. How long would it realistically take for Europe to transform its energy market? Is genuine energy security feasible, or will Europe leave itself vulnerable to new dependencies?
Helen Thompson: I don’t think it is possible for European countries to end their energy relationship with Russia. The world economy cannot function without Russian crude oil. Even if less Russian crude oil is now coming directly to Europe, more of it is going to Asia – in particular, India – and then returning to Europe as refined petroleum products. Likewise, there is not enough supply of liquefied natural gas available for export for European countries to replace pipelined supplies from Russia with sea-borne imports from elsewhere.
European countries are condemned to struggle with energy security, because they are not resource-rich. And more wind and solar power won’t change that, because the use of these energy sources requires metals that come predominantly from elsewhere in the world.
PS: Soon after Russia invaded Ukraine, you wrote that, “It may be that the only remedy for rising [energy] prices is curtailed demand, lower economic growth, and all the accompanying social and political ills.” And it may well be the West’s turn to suffer those ills: as you recently tweeted, “Since around 2005, oil prices generally have been either too high for net importing countries or too low for net exporting countries. Western governments can’t now expect to be heard about one side of the dysfunctionality, having ridden the advantages of the other.” Should Western leaders be focusing more attention on the “politics of personal sacrifice” than on, say, imposing a price cap on Russian crude?
HT: The politics of reduced energy consumption are very difficult; I don’t want to minimize that. Asking citizens to use less energy is the politics of personal sacrifice, and the conclusion that Western politicians drew from the 1970s is that this is politically unviable. For example, Jimmy Carter’s effort to convince Americans to reduce their energy consumption during the oil shocks destroyed his re-election chances.
But the fact is that there isn’t that much alternative oil supply out there in the short term. It’s a seller’s market. What will change oil markets is a reduction in demand, whether that is brought about by a recession or by efforts to reduce discretionary oil use.
PS: “Because Chinese demand for gas is accelerating,” you wrote in March, “there is an intensifying competition between Europe and Asia over a limited global supply of LNG.” On the Talking Politics podcast, you highlighted a related competition: the Russians, the Saudis, and, to some extent, the Americans have raced to cash in on Asian, and especially Chinese, energy demand. How has China changed energy producers’ calculations and energy markets more broadly?
HT: China’s growing energy consumption has caused two big price shocks over the past two decades. The first was an oil shock in the mid-2000s, when sharply rising Chinese demand ran into stagnating supply. This culminated in an all-time oil-price peak in June 2008. The second episode was a gas shock in 2021: Chinese demand for LNG imports grew by nearly a fifth last year, sending spot gas prices soaring in Asia and Europe.
Both shocks amounted to major opportunities for the big energy producers, especially Russia. What was once a European energy power has gradually become, since the mid-2000s, a Eurasian energy power with more strategic options. Russian President Vladimir Putin’s war against Ukraine is clear evidence of this.
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BY THE WAY . . .
PS: On Talking Politics, you noted that the quest to recapture energy independence has caused the US as many problems as it has solved. What did US policymakers do wrong, and what are the biggest flaws in US energy policy today?
HT: I am not sure that it is a matter of US policymakers doing something intrinsically wrong. Rather, they seem not to have understood all the implications of the US becoming once again the world’s largest oil producer.
The shale oil boom had to destabilize the US-Saudi relationship. President Barack Obama’s administration acted as if that didn’t particularly matter, because the US had more power. But that didn’t mean the Saudis had become powerless; they could still influence oil prices much more than American producers could, and the US remains a significant net oil importer. The problem now is that US policymakers wanted to jump ahead to a future that has not arrived. They still need an oil strategy, and they haven’t got one.
PS: In Disorder, you examine the role of debt in the crisis of democracy gripping much of the West. How did the turn to international capital markets shake democracy’s foundations?
HT: This is a complicated story. Broadly, the turn to international capital markets in the 1970s made it significantly harder over time for Western politicians to sustain an idea of economic nationhood, whereby to be a citizen of a democratic state was to be part of a political community that shared – to some degree, anyway – a material fate.
In the post-1970s world economy, it became more difficult to maintain full employment among men and to tax some large corporations and very wealthy individuals. Trade unions found it harder to defend wage-earners’ incomes. And it became easier for the rich and politically well-connected to influence policy outcomes. Meanwhile, in Europe, the response to macroeconomic turbulence entrenched technocratic claims over democratic ones.
PS: Disorder was published on February 24 – the day Russia launched its invasion. As you commented, “It feels pretty strange to be publishing a book in part about Europe’s long-standing geopolitical fault lines around Russia on this day. But Disorder is my attempt to understand the world in which we now live.” Based on the events of the intervening months, is there any point made in the book that you would revise or expand on? Anything new you would add?
HT: There are a few things I would do differently in describing Europe’s geopolitical fault lines around Ukraine. For example, in my discussion of the end of World War I, I would include the problem of the first independent Ukrainian state, and its utter reliance on Germany. In the later history, I would draw out Ukraine as a site of resource conflict, and not just energy-transit conflict. And – though this would have been tricky given the choices I made about how to frame Disorder – I would have positioned Putin’s war as an attack on Ukrainian nationhood in the name of older Russian territorial claims.
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