With oil and gas prices on the rise for months, people around the world have been feeling the effects. Some Europeans have seen their monthly heating bills go up by 500 percent from last winter, and Americans are paying an average of a dollar more for a gallon of gas than they did a year ago. All that was before Russian President Vladimir Putin decided to invade Ukraine. Amid everything the assault means for the people of Ukraine and the surrounding region, it’s also had global economic consequences, putting at risk Moscow’s exports of oil and gas during a time of already volatile prices—and as most countries are trying to cut fossil-fuel use to slow climate change. What happens now?

David L. Goldwyn was the U.S. Energy Department’s assistant secretary of energy for international affairs from 1999 to 2001 and the U.S. State Department’s special envoy and coordinator for international energy affairs from 2009 to 2011—the only person ever to hold both offices. According to Goldwyn, commodity prices had been rising because demand had returned to pre-pandemic levels, but there wasn’t enough supply. He says the war is going to have substantial consequences for oil and gas for the next five years. As Goldwyn sees it, European countries will try to reduce their reliance on Russia for gas, and oil producers worldwide will have to reconsider their calculations about whether to extract more crude. But for economic and political reasons, the Ukraine crisis won’t fundamentally alter the long-term move away from fossil fuels.


Michael Bluhm: What was behind the sharp rise in oil prices before Russia invaded Ukraine?

David L. Goldwyn: Oil prices were at $30 a barrel in mid-2020. As a result, investment fell off—people stopped putting money into producing new oil and gas, and inventories built up. When Covid started to ease, and people adapted to it, demand rose dramatically—about a million barrels a day. Prices ticked up from $30 to almost $80 a barrel before the Ukraine crisis. That was purely a matter of increased demand and a constant level of supply.

OPEC had the ability to put more oil on the market, but it was very clear that it wasn’t going to do so. The reason was, ensuring prices remained high to make up for the revenues they lost when oil prices were $30 a barrel.

Bluhm: How will the invasion affect all of this?

Goldwyn: In the Ukraine crisis, people worry about two things. First, whether Russia would willingly withdraw oil or gas supply from the market and leave it short millions of barrels of oil. Second, whether war or sanctions would disrupt imports of oil or gas from Russia and create a scramble for barrels. That drove prices from $80 to $90 and close to $100, all out of fear of supply.

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