According to Dan Brouillette, who served as the energy secretary under the Trump administration, some of the steps taken by European governments to reduce electricity bills can be compared to a “Ponzi scheme.”
“One of the easiest policy levers if you will, is that you can pass a bill, appropriate money and give money to citizens to pay their electricity bills,”On Monday, Brouilette spoke with Hadley Gamble of CNBC outside the Gastech convention in Milan.
Such actions might have a “inflationary impact,” he said.
In response to a question regarding whether these actions resemble a Ponzi scheme, Brouillette said, “You could describe it that way. There’s no question about that.”
“It alleviates the immediate pain of not being able to pay the electricity bill, but the money just moves in a circle … It just goes from the consumer to the electricity company … it’s not a long-term solution,” he added.
Energy ministers from the EU nations will gather on Friday to discuss strategies for containing the rising cost of gas.
Monday saw a 30% increase in gas prices across Europe as a result of Russia’s announcement that its main gas supply pipeline will stay closed indefinitely. Recent months have seen a substantial decline in gas deliveries to Europe from Russia, historically its top energy source.
Consumers should prepare for rising energy prices in the foreseeable future, according to the former energy secretary.
According to Brouillette, oil markets are “very tight” globally and as winter approaches, more oil will be consumed for heating and other purposes. The possibility of a shortage of energy arises as Saudi Arabia suggests reducing its oil output.
According to Brouillette, the solution to the shortage is to “produce more.”
“If we can produce more, create more infrastructure development in the United States, in Europe — that is the ultimate answer to the questions.”
He continued by saying that it was crucial for the United States to resume its pre-pandemic levels of output.
“We are still roughly … a million and a half barrels short per day of what we were producing just two and a half, three years ago. So I think it’s very important that we get back to that number.”
The International Energy Forum’s secretary-general, Joseph McMonigle, added that there is still an imbalance between oil production and demand. “A lot of people think the gap between supply and demand is all OPEC or OPEC+ but half of that is still from U.S. producers,” on Monday, he said on “Capital Connection” on CNBC.
Instigating American oil producers to stop exporting their products and put American customers first, according to Brouillette, was a “strange request by the [Biden] administration.”
Jennifer Granholm, the secretary of energy for the United States, recently asked the nation’s refiners to cut back on petroleum exports and instead increase fuel stocks.
According to Brouillette, doing so is “impossible,” because the oil market is in “backwardation.” Backwardation occurs when a commodity’s current price trades higher than its futures price. He interprets this to suggest that manufacturers have more motivation to sell their goods. He continued by saying that American publicly listed companies have fiduciary obligations to their shareholders.