Europe Is Losing the Energy WarHere’s how the continent can fight back.

Mark P. Mills

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Wars are fought on many fronts. So far, Russian president Vladimir Putin is winning the energy war. High energy prices, triggered by supply disruptions, have neutered Western sanctions. Russia’s current account balance stands at record highs. Meantime, the same forces are de-industrializing Europe right before our eyes. Industry after industry is throttling back, shutting down, or considering doing so if the energy chaos continues. Britain is staring at the potential shutdown of 60 percent of its manufacturers. Germany and most of Europe are on the same track.

Discussions of how to rebuild Ukraine when the ground war eventually ends are prevalent, but the question of the decade will be how to rebuild Europe’s industrial infrastructure. Industrial facilities and supply chains that use and produce energy can’t easily be restarted once stopped. That’s one lesson, at least, that policymakers should have taken from the Covid lockdowns.

Europe is learning the importance of energy resilience and reliability and seeing just how pivotal energy-intensive industries are for an economy. With gas and electricity prices soaring by as much as 1,000 percent, the fuel bills to make steel, aluminum, glass, or fertilizer in Europe far exceed what the final products can be sold for—hence the closures. Those products are inputs to other domestic industries, from cars and beer to agriculture, that are scrambling for other sources or closing down themselves.

All this economic carnage and geopolitical leverage arises from Europe losing just 5 percent of its total energy supply. Most of that loss comes from an overall 20 percent drop in available natural gas (courtesy of Russia’s maneuvers), which itself constitutes about one-quarter of overall EU energy. That gap cannot be closed by surging Europe’s vaunted renewable energy sources. The extent of this still-developing energy crisis, and the collateral damage in inflation, jobs, and exports, depends now on the vicissitudes of nature (a cold winter could be catastrophic) and what unfolds from the war in Ukraine.