Russian Oil: What’s the Alternative? The MultiLateral Week – 10th March 2022

Rebecca Harding, CEO Coriolis Technologies
March 10th 2022

Welcome to our Multilateral view of the week. This week Dr Rebecca Harding looks at the dependency on Russian oil, alternative Energies and nuclear power.

Welcome to the MultiLateral week in data.  We’ve been talking a lot about the Russia Ukraine conflict at the moment and a lot of this discourse has centred around the decision by the USA to exclude Russian oil completely from its trade profile, and for Britain and the European Union over a longer period of time to start to phase out dependency on Russian oil.
 
This creates a problem, particularly for Europe because the result of reducing the dependency on Russian oil means that we have to look very quickly at alternative providers. Russia is actually one of the biggest export nations in terms of fossil fuels, so Petroleum crude oil, Petroleum refined oil, and gases, as well as coal. These are all areas where we depend very heavily on Russia. If we look at Russia in terms of what it does, you can see very clearly that its trade is focused in this area around the European Union.
 
If we take a look at electrical energy it’s a fraction of what we have at the minute, but you can see immediately the electrical energy, which comes from nuclear power, and in particular Germany, France, Switzerland, and Canada, but mostly Europe are all able to trade in nuclear power. This is an area that will inevitably come under discussion because of the dependency on Russia.
 
Russia’s dependency on China is lower as well, so you can see already that there is a compelling reason for Europe itself to be generating more by way of electric power.  That means a decision around nuclear and that’s something that obviously all policymakers will be thinking about at the moment. But because the European Union has decided to record nuclear as sustainable under its taxonomy it probably means that we will be looking more at expanding nuclear power in the coming months and years now.
 
The other areas are alternative energy, this is where it starts to get interesting because you can see how integrated the world still is in terms of alternative power. You can see this chart is looking at solar power generating sets and it also includes the turbines and the blades that are for wind power as well. You can see that the major exporter is China, and the Republic of Korea is second, but you can see within Europe there is also Germany which is very dominant within the sector.
 
However, what a shift to solar power might do is create a greater dependency on China because all the way through in terms of just generating sets, i.e. the towers and the blades and the mechanics, you can see that China’s trade has been increasing where everywhere else has been falling back.
 
Germany is strong but it does create a dependency on China if we look in more detail, we can look at for example solar dishes and can see that China is still a dominant partner. Germany and the USA are slightly more dominant but not as dominant as China and so the strategic shift towards solar energy needs to be thought through very carefully because it still creates interdependency.
 
It’s the same story when you look at photovoltaics i.e. the types of technology and electrical apparatus that converts solar energy. Germany and China are the two dominant providers here and the same is the case as well if you start to look at lenses. Although interestingly you can see that Germany is much closer to China in terms of what it provides. The only concern is that the trade has been dropping for the last couple of years.
 
If we look at alternative energy of all other types, however, you can see that Germany, the USA and Europe are much more dominant. Now this includes things like biomass and biodiesel so it includes the non-fossil fuel gas that can be created from renewable sources and what’s interesting here is that although China is still a very big provider, you can see that Germany the USA, Japan, Italy, Netherlands, France and the UK are also very big actors in this area. So all the technology that’s necessary to produce biodiesel and to produce any type of non-fossil fuel energy i.e. proper alternative energy, you can see that there is a reason for Europe developing that as a centre of power literally and figuratively.
 
Now the only cause for concern is that if we go back to fossil fuels at the beginning and look at the total fossil fuels. Fossil fuel trade is 1.96 trillion US dollars. If we add up all of these different energy sources then what we end up with is a figure that is just one trillion dollars. And that is purely for the energy infrastructure in alternative energy and not for energy itself. So there’s a long way to go before we can become truly transitioned over to alternative energy sources, but that doesn’t mean that we shouldn’t be doing it, because it’s almost certain that the demand is there and you can see this very clearly.
 
European Union exports of electric cars have grown in importance over the last few years and you can see quite clearly in the growth of spark ignition and electric motors. So the demand for convertible engines has been growing, but you can see how actually electric vehicles are growing very quickly indeed. And this means that there truly is a demand out there for alternative energy products. We are beginning to see trading all of these things grow even if they’re actually too small at the moment to be able to transition quickly to anything alternative.
 
There are a couple of other areas where we need to think as well. The first is this if you look at supply chains in critical minerals for electronics which we will need for battery supplies in electric cars, but also for all sorts of things like mobile phones and so on, you can see that Russia’s trade has been dropping back quite considerably. This has been one of the concerns of the sector that because of things like rare earth materials, we’re still going to end up being dependent on Russian sources. So although we can see that there is a lot of trade that goes on over the last few years, we’ve been dropping down our trade in terms of these critical minerals as well.
 
In the case of China, it’s slightly different and looking at China as a whole you can see that between 2018 onwards and partly as a result of American restrictions, we’ve also been reducing our dependency on exports from China in these critical areas that will help us transition.
 
So to summarise all of this, there is hope. We are beginning to use more electrical energy. Europe has strengthened all of this but it’s going to take a long time to transition. Maybe this is our way out, though this is something that we have to do not just because of the current conflicts but also because if we remember anything from 2021 at all, it was the fact that we ended the year thinking about climate change and the necessity to transition away from fossil fuels let’s hope we can use this as an opportunity.

 

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