Why energy prices are surging in Europe
ARI SHAPIRO, HOST:
Winter is coming, and for many people, it will be a very cold one because something wild is happening in the energy market. Oil and gas prices in the U.S. are way up. In Europe and Asia, coal and natural gas prices just hit record highs.
BILL BLAIN: The burden of the increased fuel rates is going to fall most heavily on the poor.
SHAPIRO: Bill Blain is a strategist at Shard Capital in London.
BLAIN: With many people scrabbling around on poverty incomes, they're going to face the choice of either paying for more for their heat or eating. It's that simple and brutal a choice.
SHAPIRO: This is already having an impact on people around the world, even before freezing temperatures arrive. You can see that in Spain, where Andrea Rizzi is global affairs correspondent for the newspaper El Pais. Welcome.
ANDREA RIZZI: Thank you very much for having me. It's a pleasure to be with you.
SHAPIRO: Will you begin by explaining why this is happening? I understand it's a combination of supply problems from traditional energy sources and also road bumps transitioning to new sources of energy.
RIZZI: Yes, you're right. It's exactly a combination of different kind of problems, some related to the weather. It was a very long winter that required many countries to exhaust their natural gas reserves. It was like that in Europe but also in Asia. Other factors related to the weather conditions is we had lower than expected wind energy in these last weeks. So this required once again to use natural gas more than expected. And on the other end, the strong recovery - economic recovery all across the world is increasing demand. So there is a problem also on the demand side, especially from China, where they are willing to reduce their dependence on coal. So all these mixed together has been pushing very high prices in natural gas.
SHAPIRO: I know that people in Europe generally and Spain specifically are seeing higher energy bills than they've ever seen in their lifetimes. What impact is this having right now already?
RIZZI: Yeah, it's true. They're experiencing strong increases in the bills. And that's especially sensitive, I think, in this moment after economic turmoil related to the pandemic time. So it's kind of putting up pressure on households that have been already affected from another kind of crisis. So this is sensitive. That's why Spanish government and other governments in Europe are scrambling to find solution.
SHAPIRO: Who benefits from the situation? I mean, Vladimir Putin in Russia seems to have a lot of control now over the price and flow of energy to Europe.
RIZZI: Yes, he is. Actually, there's been speculation in Europe about this. Some analysts suspect that Russia may have been voluntarily withholding gas. Actually, President Putin yesterday spoke about this. He said Russia is in the near future considering and willing to increase exports. And this has been having a calming effect. But I would say that Russia, it's a big winner in the short term of the situation.
SHAPIRO: Scientists agree that the world needs to switch to renewable energy sources almost immediately to avoid the worst climate catastrophes. Are the challenges that we are seeing right now likely to make this transition more difficult?
RIZZI: I think this is a good point. The situation shows that the transition towards cleaner energy with the incentives and schemes that are in place to try to achieve that have collateral effects, and these collateral effects disproportionately hit vulnerable households. It's not the same - having higher bill when you're kind of comfortable economic situation. So this highlights that this transition will create new losers just like globalization did.
SHAPIRO: Andrea Rizzi is global affairs correspondent for El Pais. Thank you very much.
RIZZI: You're welcome.
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