The European Union relies on imports for 96% of its crude oil supply, and about 30% of this comes from Russia. Oil is by far the biggest source of Russia’s export revenues — more than twice as much as the revenues from its gas exports — of which the EU is giving Vladimir Putin $285 million a day.
Inside Climate News clearly described the situation: “Just weeks before Putin’s Feb. 20 invasion of Ukraine, Russia’s finance ministry announced the budgetary windfall it had enjoyed in 2021 as a result of unexpectedly high oil and gas prices. The Russian government’s oil and gas revenues exceeded initial estimates by more than 51 percent. In October, as Europe struggled with high natural gas prices, caused in part by a slowdown in Russian supplies, Russia was taking in almost $500 million per day in fossil fuel revenue.”
In view of the above, the strongest reply to the aggression of Russian President Putin could be an immediate and substantial reduction of oil consumption. Such a measure would reduce Russia’s revenues not only due to its ability to export less but also due to the fact that when demand falls, usually prices fall, too.
It is stunning that many governments have implemented or are planning to implement measures that boost oil consumption, seemingly playing into the hands of Putin. The Japanese government has more than tripled already existing fuel subsidies to $0.15 per litre. Ireland has reduced the excise duty by 20 cents per litre on petrol, and 15 cents per litre on diesel. The French prime minister announced that it will introduce a rebate of 15 cents per litre for four months, which would cost the government more than €2 billion. Sweden is planning to reduce tax on petrol and diesel and give each car owner SEK 1,000 in a one-off support payment. Even one of the most vocal opponents of Russia’s aggression, Poland has reduced the VAT on transport fuels from 23% to 8%.
The Hungarian government has put a price cap of €1.26 on petrol and diesel, reduced the excise duty by about 7 cents, and provided a subsidy of about 5 cents per litre to smaller filling stations. As fuel prices now are much lower than the market price, daily fuel consumption has trebled. Although most of this is due to increased fuel tourism, fuel smuggling and stockpiling of cheap fuel for later use, it has substantially increased road traffic, especially in some border regions.
Lower fuel prices lead to higher fuel consumption, exacerbating the very problem that the governments try to solve. Fuel subsidies thus also result in more environmental pollution and more emissions of greenhouse gases.
Moreover, the subsidies on transport fuel are taxpayers’ money, and therefore, at the end of the day, they will not benefit at all from the increased fuel subsidies. Such measures are all the more perverse, because the increased subsidies benefit mainly rich people (for example, in the Netherlands, the richest 10% of the population spends 14 times more for transport fuel than the poorest 10%, and in Hungary 7 times more), thus contributing to social inequalities and injustice, and financing those persons who contribute by far the most to climate change.
They are even more perverse, taking into account the enormous amount of already existing fossil fuel subsidies. According to the International Monetary Fund (IMF), the world’s fossil fuel industry receives subsidies of 11 million US dollars every minute, and in Europe this subsidy amounts to more than €500 billion annually. These subsidies must be urgently removed (the EU and other G7 countries promised to eliminate them by 2025) and in no case should they be increased.
One of the reasons given for the fuel price freezes and subsidies is that it can help to reduce inflation. But it is war and environmental pollution that cause the highest inflation. There is hardly anything else that would increase costs more than the sickness and death of masses of people as well as the destruction of economic assets. For example, if agricultural production in Ukraine will be disrupted due to the war, food prices will skyrocket all over the world.
Most importantly, as increasing subsidies on oil products results in increased demand for oil and higher market prices, more and more money is flowing to the Russian government to finance its war machine.
In order to counteract Russia’s aggression, national governments must immediately repeal the tax reduction and subsidies concerning oil products. The European Commission must call on the respective governments to take such a measure and in case they refuse, all EU funding must be immediately suspended to them.
There are certainly legal grounds for the latter: an unjust and terrible war must not be supported with public money, and — in accordance with the Commission’s declared position — no EU money should be allowed for countries that weaken rules protecting our environment.
National governments should also suspend all investments that need large quantities of oil products (e.g., road construction). Empty flights must be prohibited and flight ticket tax must be introduced or raised. Local governments must introduce emergency measures to reduce car and truck use, among others, by effective traffic calming measures, promotion of environmentally friendly passenger and freight transport modes, raising parking fees, and organising car-free Sundays each week.
As most people in Europe are not fully aware of the relation between Russia’s oil exports and its aggression against Ukraine, it is essential that national and local governments start a wide-scale campaign informing people that our addiction to oil fuels Russia’s war machine and ask them to save oil as much as they can. They should use cars only when absolutely necessary, and refrain from flying. Companies should reconsider how and when they transport goods. Everyone should sign the Avaaz call to $top fuelling Putin’s war!
Targeted aid must be provided for the poorest layers of society. This should not pose a problem for governments as all EU member states already have in place various social assistance systems. Poor people would benefit most even if the same monthly payment would be provided for each citizen (see for example, the case of Canada and Hungary).
All these measures can be implemented within a matter of weeks. Even the announcement of these measures would certainly have an immediate effect. In the current situation, we cannot wait even one minute.
Putin is probably convinced that Europeans are so obsessed with their cars that they will not quit using them even temporarily, no matter what he does in Ukraine. Let’s prove that he is wrong.
Originally published on Transport & Environment.
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