Europe’s Energy Crisis: Causes and Possible Cures
(Former Amb. Peter Hoekstra, September 30, 2022)
Transcript available below
About the speaker
Peter Hoekstra was U.S. Ambassador to the Netherlands during the Trump administration, and he served eighteen years in the U.S. House of Representatives, representing the 2nd District in Michigan. He served as Chairman and Ranking Member of the House Intelligence Committee. He is currently Chairman of the Center for Security Policy Board of Advisors and a Distinguished Fellow at the Gatestone Institute.
During his tenure as Ambassador to the Kingdom of the Netherlands, The Hague hosted the Department of State Global Entrepreneurial Summit in June of 2019, which was attended by over 2000 entrepreneurs, investors, and other business leaders. The Dutch Parliament created the American Friendship Group at his urging. He continues to aggressively and effectively promote United States foreign policy goals and objectives.
Pete served in the United States Congress for 18 years, representing Michiganās 2nd Congressional District from 1993 to 2011. He served as Chairman of the House Permanent Select Committee on Intelligence from 2004 until January 2007. He was a member of the Gang of Eight from 2004 until 2011 receiving the most highly classified information available in the U.S. government.
Prior to his service in the U.S. Congress, Pete had a successful career at Herman Miller, Inc. of Zeeland, Michiganāa company frequently cited as one of the most admired in America and one of the best places to work. Over his 15 year career at Herman Miller, Pete worked in a variety of positions rising through the ranks to become the Vice President of Marketing.
In 2008, Pete was appointed as an Officer in the Order of the Orange-Nassau, a royal honor from the Dutch government. The Central Intelligence Agency (CIA) awarded Pete with its āAgency Seal Medalā and the Director of National Intelligence awarded him with the āNational Intelligence Distinguished Public Service Medalā.
Pete earned a bachelorās degree in political science from Hope College and a Masterās of Business Administration from the University of Michigan.
Transcript
Introduction
Robert R. Reilly:
Hello and welcome to the Westminster Institute. I am Robert Reilly, its director. And today, we are delighted to welcome back to the Westminster Institute, Pete Hoekstra, who last graced us with a presentation in 2015, so it is overdue and we are delighted to have him here.
Now, Peter Hoekstra was U.S. Ambassador to the Netherlands during the Trump administration, and he served eighteen years in the U.S. House of Representatives, representing the 2nd District in Michigan. He served as Chairman and Ranking Member of the House Intelligence Committee. He is currently Chairman of the Center for Security Policy Board of Advisors and a Distinguished Fellow at the Gatestone Institute. He joins us at Westminster today to discuss: Europe’s Energy Crisis: Causes and Is There a Cure? Pete, welcome back.
Peter Hoekstra:
It is great to be with you, thank you. Yeah, 2015, it has been too long.
Robert R. Reilly:
Ambassador, you were recently back in Europe, in fact, in the Netherlands where you served so well as the U.S. Ambassador. And I am sure the energy crisis must have been one of the things at the top of the issues that you discussed.
Dutch Farmers
Peter Hoekstra:
Yeah, actually, I was invited to go back to talk about the other key crisis that I think we face here in the West, that freedom-loving democracies face, and that was China. So they invited me to come and speak about China, and I went and I fell smack dab into a couple of other crises, the energy crisis and also the agriculture crisis.
I do not know if people have seen it, but the Dutch farmers have been at the forefront of the environmental movement right now, and the forefront in a couple of ways. I mean they are some of the most productive farmers in the world. They are the second largest agricultural exporter in the world. The U.S. is number one, but we have 340 million people. The Dutch are the second largest, and they have 17 million people.
Robert R. Reilly:
That is astonishing.
Peter Hoekstra:
But they are under assault right now because the government wants to reduce nitrogen, nitrogen deposits, and so they have initially put forward a plan that will take 12 percent of farmers and put them out of business, and another 27 percent of their farmers, and reduce their business by at least 50 percent. And these are government estimates. These are not political party estimates or whatever. These are official government estimates as to what these new rules and regulations will bring to the farmers, and so I asked to meet with some of the farmers, and then when you are meeting with the farmers, you also run smack dab into the energy crisis because farms use energy, agriculture uses energy, so we talked about energy and we talked about China.
Robert R. Reilly:
I understand that ammonia, which is extracted from gas, is essential for the production of fertilizer. And the tremendous decline of gas imports, obviously from Russia, is creating a crisis in the fertilizer industry and some of it is having to shut down, and that will cascade into this enormous problem for farmers.
How Europe Got into an Energy Crisis
Peter Hoekstra:
Yeah, you are a little ways ahead of me, but that is exactly right because right now Europe is in the midst of an energy crisis. I dealt with the Dutch government, and my colleagues dealt with the rest of the European countries, talking about energy, and we said you need to develop sustainable energy sources, you need to have a secure network, you need to have sufficient quantities, and they need to be affordable. These are kind of the principles that we took to our European colleagues because what were they doing?
Germany was closing its nuclear plants. Everybody was closing their coal plants, so they were getting rid of base load energy, and they really did not have a plan that was sustainable, and affordable, and secure moving forward, at least from our perspective. There was a lot of focus on the Nord Stream 2 pipeline, and we said is it really good policy for Western Europe, our allies, to become dependent on Russian natural gas. Is it secure? Is it going to be affordable?
And I still remember going and dealing with the Dutch media, primarily, and there were two things that we would go talk to them a lot about. We would talk to them about paying for NATO, 2 percent, and we would talk to them about Nord Stream 2 because in my case, the Dutch, being a wealthy country, were financing it, a good portion of it, and also, by having great technology for water, they were helping build it.
So we would talk to the media, and they would say, Pete, 2 percent for NATO, why do we need to pay? You crazy Americans, you and Trump believe Putin is going to come across the border in his tanks. And then they would laugh. And we would just say, well, you know…
Robert R. Reilly:
Surprise.
Peter Hoekstra:
…if they do, we ought to be ready.
Europe’s Dependence on Russian Energy
Robert R. Reilly:
Well, I mean you would think. It certainly was consistent U.S. policy, going back to President Reagan, to discourage the Europeans from making themselves dependent upon Russian gas, and of course, during the Cold War, the reason for that was pretty evident though the Europeans still wanted to do it. Thanks to some of the European leaders in office at that time, it did not get as bad as it otherwise would have. So one can understand at the end of the Cold War, what is the problem, and therefore since gas burns cleaner than other forms of energy, they thought getting more of that would make it easier for them to go green.
So from what I understand, and you can correct me, Germany got 50 percent of its gas from Russia, and Europe overall got 40 percent [of its gas from Russia]. Is that right?
Peter Hoekstra:
Yeah, that is about right. And again, when you would point that out, and you would say is this [advisable], and with Nord Stream 2, those numbers would have gone higher, and so you would say is this really a good strategy to become more dependent on Russia? And they would laugh, again, and they would say, Pete, what do you think the Russians are going to do? They need our money. You think they are going to turn off the spigot? Oh, you are just saying this because you want them to buy U.S. gas. And I would say, no, actually, we recognize gas is an international commodity. There are world prices.
But yeah, we would encourage you to build LNG plants and port facilities so that you could compare the price and quantity coming from Russia, and compare it with [alternative sources of energy] coming from the U.S. or coming from the Middle East so that you would have alternatives, that if Russian gas was turned off or American gas became too expensive, you could just tell the Americans, sorry, we are not buying your gas. We are going to Russia because it is secure and it is affordable.
Well, what we have recently found out is it is neither. Gazprom has cut off their energy, their natural gas, to the French. The Nord Stream pipeline or the pipelines coming into Germany have been shut down for maintenance reasons. And in the last couple of days, we have now also seen that the pipeline – because the other place that Europe gets natural gas from is they get it from Norway, and so the Nord Stream pipeline coming from Norway going into Germany is now suffering ‘technical difficulties’ as the people of Denmark have described it because it goes through part of their country underwater.
It is damaged. It is not working the way that it should. And they are not ruling out that it was sabotaged, and so here, all of a sudden, Europe is in an energy crisis. So how does this play out in the Netherlands when I am there? I had lunch with some of my staff that worked for me there. They are seeing their energy costs for electricity and heating their homes going as high as ā¬600 per month, so with the exchange rate, that is $600 per month just for electricity and gas, significantly higher than where they were before.
They are worried about shortages, that this winter, if it is a cold winter, it is not going to be how much you are paying, it is going to be whether there is actually enough. And then you go [to] what you were talking about. I have got a colleague who has been doing a lot of work in Germany in BASF.
[They have] lots of fertilizer plants, and I do not know if they have twenty-seven in Europe or twenty-seven in Germany, but to efficiently run a fertilizer plant, you need to be able to get at least 50 percent of the natural gas that you need to operate the plant. If you get below 50 [percent], you just cannot operate anymore. If you are between 50 [percent] and 100 [percent] optimal, you are fine.But they are getting to the point now where a number of their fertilizer plants cannot get enough feedstock, and they are on the verge of shutting down, and that creates two problems. It creates a problem because people are put out of work, but it is also going to create a problem because you are going to see a shortage of fertilizer in Europe and maybe the world, and that means that there is going to be less food production. So it is a cascading problem when governments put themselves into a position where they are this vulnerable to outside pressures for a key component of what a country and an economy needs to operate effectively.
Why Did Europe Abandon Alternatives?
Robert R. Reilly:
And having made themselves all the more vulnerable by shutting down coal plants, shutting down nuclear power plants, especially as Germany has done. What was the motivation for doing that? I mean you can understand the coal plants as a big polluter, but nuclear plants do not pollute.
Peter Hoekstra:
Germany, Merkel made the decision on nuclear power based on Fukushima. When they had the disaster in Japan, Merkel and Germany, rather than saying, okay, let us take a look at exactly what the problems were in Japan, see if we face some of the same threats or some of the same concerns here in Europe, and then let us address those, [she instead] basically said nuclear [plants] are bad, we are going to close them, and so it was all based on what happened in Japan, a one-off.
Robert R. Reilly:
A one-off in which no one was killed. I mean it was a huge earthquake.
Peter Hoekstra:
Yeah, a huge disaster, and this is where they made the decision to close them, and they did not put in place a reliable alternative plan. They said, okay, we are taking this all offline. Oh, wait a minute, this is X-percentage of our production of energy, of electricity. How are you going to make that up? You cannot make it up with solar. You cannot make it up with wind.
We do not have the battery storage technology capacity or capability. When it runs, you build up the batteries. And when the wind does not blow, and the sun does not shine, you can go back to the batteries. That technology does not exist, so I have described it [as] they built an energy strategy based on hope, that the sun would shine and the wind would blow at exactly the right times so there would not be any disruption because they are right at that margin. We are producing enough, but if there is any kind of disruption, woah, and they not only found a little disruption, what they found with Russia, they have now found a significant disruption.
Robert R. Reilly:
Well, France, as you know, never suffered from a phobia with nuclear power, and some 70 percent of its energy is produced by nuclear power plants. However, currently they are only running at 50 percent capacity [because of] pipe corrosion, maintenance, inspections, labor problems, and apparently another thing. I do not know if this is an issue in the Netherlands. The drought in Europe is so severe that some of the river water that is used to cool plants [is unavailable because] there simply is not enough of it, and it is dangerous to run the plants without the cooling, and they have to shut them down.
Peter Hoekstra:
Yeah, but you are absolutely right. I mean, again, this is a lack of foresight by their political leaders in that number one, what you would do is you would think you would space out your maintenance. Okay, every year we are going to take 10 percent of the power offline, and over a ten-year cycle or an eight-year cycle, whatever the experts tell you, we will replenish it, or we will refurbish it, on this schedule so we will never have to take a big part down. But to take 50 percent down of your 70 percent at one time, [is risky], you are exactly right.
And no, the Dutch have also had a drought issue. It has not affected the – I think they have only got one nuclear plant that they are operating, so it has not affected their ability to operate their nuclear plant, but it has had other impacts in the country.
Robert R. Reilly:
I was following a story in France of the largest glass producer in Europe or perhaps the world, that has to keep its furnaces that melt the sand on all the time. If you turn them off, the furnaces are ruined. I mean they can over the period of a month kind of slow it down, cool it off, turn it off, and pull maintenance, but if the energy supply is not there to keep the furnaces going, this huge employer in this certain part of France goes under, it will be an economic catastrophe for the area because it is not simply the glass they produce, there are the cardboard box makers, people who make the packaging to put the glass, etc., so there is a cascading effect there.
Apparently, a Russian government spokesman said, speaking of their maintenance problems with Nord Stream 1, that somehow those problems would go away if Europe would lift the sanctions against Russia. So it is a political move by Russia’s part. As you pointed out, the Europeans made themselves susceptible to this.
Peter Hoekstra:
Yeah, these are all self-inflicted wounds.
Robert R. Reilly:
Tanks do not have to roll. You could just have your energy cutoff, and your societies can go into crisis.
Flowers
Peter Hoekstra:
Which is exactly what is happening in Europe. You have brought up fertilizer, you have brought up the glass manufacturer. In the Netherlands, one of their largest exports, one of their largest agricultural exports, is not necessarily food that we eat, it is flowers, right, the Dutch are known for their flowers.
I was at a flower grower. And he was saying Pete, right now I am fine, okay? I have green houses. It is warm, but the temperatures are fine. I am not using much energy, so we are okay. But he said his energy costs had increased eightfold, and it is a big component of his operation. And he is saying this winter, I really should just shut down. But he says I cannot because if I shut down, my whole supply chain is disrupted.
He says I am the beginning of the supply chain. But if the farmers in the Netherlands shut down, then it has an impact on the whole chain of supply that gets a flower from the Netherlands to a store here in the U.S. And he says if I shut down and we do not grow, then the flower auction shuts down. And then there are holes in the KLM planes. People think KLM, [the Dutch airline company], flies people, but what really propelled a lot of their growth is that they have transported flowers around the world in their cargo hold.
This is why the auctions in the Netherlands [are so important to the flower market. It] may be for multiple reasons, but one of the reasons is they are so early in the morning. You want to go to a flower auction? It is exciting, it is fun to watch, but you have got to go at 4:30 am in the morning, 5:00 am in the morning because I think by seven o’clock at the latest, they are done, and the auction halls are relatively close to Schiphol. And the trucks are taking all of these flowers to Schiphol to get them on KLM airplanes.
But this farmer says I have got to keep growing. He says I do not think I am going to make any money. I think he was selling a stem, a chrysanthemum stem. He says my price right now is 25 cents. He says, “But this winter, I am going to need to get at least $1.50.” That is what he is getting. And then you get all the different markups, and he says, “I am not sure there is going to be any customers, but I have got to keep growing, and if I have to take a lower price or whatever, I am going to lose money, but I have got to keep the supply network in place.” That is what happens when a key part of your economy goes in the tank.
Robert R. Reilly:
I understand that problem is [also] affecting greenhouses, hot houses that grow vegetables and tomatoes through the winter. They will not be able to stay open either if the energy problem gets worse. And Europe has promised to stop importing Russian oil by the end of December, correct?
Peter Hoekstra:
They have promised lots of things, but yeah, no, you are right, no, you are right, but currently they are still importing, but they are saying at the end of December, at the end of the year, no more imports of Russian oil and gas, yes.
Robert R. Reilly:
And they do generate a good deal of their energy from oil, so that is going to raise prices. I mean you wonder what the breaking point is here. I know that recently 70,000 people were in the streets of Prague, demonstrating against these energy prices, and pretty much saying ‘the Czech Republic first,’ you know, you take care of us. This Ukraine thing is damaging us all,’ and of course, I presume that is why Russia is using this as a lever to break the European coalition against Russia in support of Ukraine.
Peter Hoekstra:
Yeah, and I think it is not hard to imagine that happening in other parts of Europe. I mean the Dutch, the population, I think recognizes how they got into this problem, and it is the decisions that their policymakers made to get out of coal, to become dependent on Russian [energy]. One of the newspapers that was very critical of President Trump and myself for bringing up these issues while I was there, in recent months wrote an Op-ed and said, you know, Hoekstra and Trump might have been right, becoming dependent on Russian gas may have been a bad idea. Their public sees it, so I do not know whether the Dutch will protest. The farmers have protested what the government wants to do to them.
But exactly, it is a tactic of the Russians to break the solidarity and the consensus of Europe to confront Russia because of its invasion of Ukraine. And it is not hard for me to imagine that – price is one thing. You can manage price in the short term, which the governments in Europe are doing. It is a bad way to manage it.
What they are going to do is they are going to provide subsidies. They are going to cap the costs that energy companies can charge, which means energy companies will produce less energy. And then what they are going to do is they are going to subsidize their citizens, send them a check to cover some of these increases. Well, that is only sustainable for a limited period of time.
What they need to do is they need to get fully involved in a rapid process to increase the supply of energy, which right now they are not doing, but for those reasons it is not hard for me to imagine especially France and Germany going to Zelenskyy and saying negotiate, negotiate. And Zelenskyy is going to have to listen because [although] the key supplier obviously is the U.S., NATO is a hollow shell in many ways, but just the fact that France and Germany would go to Zelenskyy and say negotiate, get a ceasefire or whatever even if you have to give up some territory, we need this energy coming in. It is tough and Russia is using it as a leverage point.
Robert R. Reilly:
Now, you mentioned the approach that European governments are taking right now, capping the price of energy and subsidizing the citizens. It would seem to me that that is the perfect formula to lead to rationing because you are increasing demand while you are diminishing supply, and therefore the only way you can distribute it is through rationing. Is that what will happen?
Peter Hoekstra:
Again, if there are more disruptions in terms of supply, [that is] very possible, but right now what you have already seen in the Netherlands is you have seen what is called 25 percent demand destruction, meaning people are looking at this. It kind of goes back to the days of Jimmy Carter where, you know, we have not reached winter yet, but the citizens of the Netherlands are saying instead of having the temperature in the house at 70 [degrees], I am going to 68 or 65 [degrees], and I am going to wear a sweater and sit under a blanket.
Industries are reducing their use of energy, not willingly but because they cannot afford [it], and the price of their goods are getting too high, so you will see demand destruction. And you are actually absolutely right. If you are getting into the price controls and these types of things, I do not think it is unreasonable to see governments then starting to say, okay, X amount is going to go for consumer use, X amount is going to go for industrial purposes and those types of things. It is a natural progression of where this goes.
Robert R. Reilly:
[It is] interesting you should mention President Jimmy Carter because some energy analysts have said this is going to be as bad as the 70s when the Saudis rationed or embargoed oil to the United States. Other energy analysts say no, this is going to be worse than the 1970s for Europe, and they also are saying this is more than a one winter problem.Peter Hoekstra:
Yeah, I mean we could increase our production of oil and gas fairly quickly here in the U.S.
Robert R. Reilly:
Why haven’t we?
Peter Hoekstra:
We have got an Administration that basically has declared war on fossil fuels, okay, but if we built out the infrastructure for oil and gas, we are sitting on hundreds of years of supply of natural gas at affordable prices, and if we unleashed it, it does not have to be a multi-year emergency, and it would be good for us. It would create jobs here in the U.S. It would create tremendous amounts of value here in the United States by exporting oil and gas, and at that point in time [go green].
Right now, we view it as either/or, right? If you are producing fossil fuels, then you are not green. Well, take the profits, and take the investments, and take the wealth that comes from fossil fuels, and use that to do additional research in terms of conservation and pushing green energy further along quicker, but again, do not make the same mistake that Europe did, which is cut down on fossil fuels, cut down on your base energy, and develop a strategy that is based on hope, okay? I mean that does not work and we are seeing it unfold right now in Europe.
I mean when President Biden came in and immediately canceled the Keystone Pipeline, and in Michigan we have a governor that wants to close the pipeline that goes under the Straits of Mackinac. We understand what you are trying to do, but recognize what this could end up doing to consumers and to business if we do not have alternatives, and right now we do not have the alternatives.
I do not remember exactly what precipitated it, but the governor in California said, hey, guys, can you charge your electric cars at a different time during the day? Do not do it during the day. It is kind of like, well, wait a minute, no, we should not have to be rationing that decision, especially while at the same time they are saying no more gas guzzling cars can be sold in California. Right now, they are proving they do not have the infrastructure to even support the limited number of electric cars that they have in place today, and it does not look like they have a plan to put in place a grid system that in five to ten years is going to be able to support an electric fleet that is much bigger than what it is today.
And there are other issues, the cost. I think the price of lithium just reached record highs and we do not produce lithium. It comes from China, it comes from Africa, and you need lithium to produce batteries. My understanding is experts are now starting to write about what are we going to do with all these batteries that [we will have] at the end of their shelf life. What are we going to do to recycle those [batteries]? There are lots of issues that are coming out, so let’s examine all of those before we go pell-mell down this path.
Robert R. Reilly:
Well, in the larger picture it certainly seems ironic that the United States very recently was energy independent, or was a net exporter of energy, and now it is once again dependent. It is importing. President Biden had to go meet with Prince Mohammed bin Salman in Saudi Arabia to try to nudge him into increasing Saudi oil production, which they declined to do, so not only was it ironic, it was humiliating.
But in terms of Europe, you have countries that also have a huge amount of energy underground if they employed fracking, but they refuse. Why won’t they do that?
Peter Hoekstra:
Well, the UK just announced, hey, we are fracking.
Robert R. Reilly:
Okay, so that turns them around, but what about the rest of Europe?
Peter Hoekstra:
The environmental movement has effectively shut down fracking, okay, and we have done it here, and there have not been consequences. Now, in the Netherlands, they did not do fracking. They have shut down their gas production. They were a net exporter of natural gas. They did it out of the province where I was born, the province of Groningen. But the difference is in the U.S. a lot of our gas where we frack and all of that are in rock formations, so when you pull the gas out, you are okay.
In the Netherlands, it is more of a peat bog, it is a marsh, so what happened in the province of Groningen is they are extracting all of this gas, and I think they have been doing it for 40, 45 years. And the ground is actually settling, and so the Dutch government said, well, wait a minute, you know, there are a lot of people that live in Groningen, and the ground is settling. So they have stopped significantly, probably 80 [percent], maybe 90 percent, of their gas extraction in the province in Groningen.
But in other parts of Europe, I think fracking is a viable alternative.
Robert R. Reilly:
But right now, it is not under consideration as it has been in Great Britain, though as you know, there is going to be a change in government in Italy, and I do not know whether they have that potential in the first place, and whether they would do it in the second.
Well, from everything you have said it certainly seems that Russia is in the driver’s seat right now.
Peter Hoekstra:
No, right, for the short term.
Robert R. Reilly:
Yeah, for the short term.
What do you assess as the long-term costs for Russia from doing this?
Peter Hoekstra:
I would like to think that the long-term cost to Russia is that they will become and will continue to be a supplier of fossil fuels to Europe, but they will not be the dominant supplier, that the end result will be going [from Russia to alternative suppliers]. Yeah, let’s be honest, they were the preferred supplier, okay, for Germany and [others]. Russia was the preferred supplier.
In the Netherlands, I would not necessarily say they were the preferred supplier, but they did not do much for LNG or saying we are going to open up our ports to U.S. LNG, so in some ways you could say even for them, Russia was an approved, preferred supplier.
What I hope happens is that number one, they diversify their energy, so they do go back – I do not know if they go back to coal, but reinvest in nuclear, okay? If you do not want to do natural gas, and you do not want to do coal, at least reconsider whether you will have nuclear [energy]. Sure, [you] can continue to expand your wind and your solar [energy production], but then also look to alternative suppliers for liquefied natural gas, which means you look to the Middle East, you look to the U.S., so that you have got a diversity of supply.
And then other experts that you talk to [advocate for], and I know that the Dutch have been trying to lead on this, hydrogen, okay? That is seen by many as a real, environmentally friendly, and clean technology, which just has not quite reached the point where it can be commercialized, but again, the Dutch have been doing a project in Groningen in the northern part of the country, trying to develop a hydrogen hub. They are trying to develop a hydrogen hub around Rotterdam, and so they are aggressively looking for alternatives to this energy dependence on outside forces, and rather than it be being a hindrance to them, moving to the point where if they can be the first to develop hydrogen or at the cutting edge, it can be a significant competitive advantage for them.
Robert R. Reilly:
I know certain Southern European countries are less vulnerable because they have gotten a lot less of their gas from Russia. For instance, Spain only got 10 percent of its gas from Russia, and was importing a lot from North Africa, and Italy, from Azerbaijan, Algeria, so that there are these other sources make them less directly vulnerable to Russian leverage on this issue, and therefore they are in a better position to continue to support the NATO position in support of Ukraine.
But those other countries are not [in a better position], and it does seem a very likely scenario that with a very tough winter in Europe, things are going to start cracking simply because the people will demand that you take care of your own citizens first. Apparently, there is a lot of European criticism of Norway now because they have restricted their gas exports because they want to protect their own citizens, which is what governments are supposed to do.
Peter Hoekstra:
…which is what they are supposed to do, exactly.
Robert R. Reilly:
That seems to me just the beginning of the fissures that can develop if there is a really tough winter in Europe, which there very well could be.
Peter Hoekstra:
Yeah, I mean because the bottom line is when you come home in Western Europe, when I went to where we lived in in Europe, in the Netherlands, or when I come home to my house in Michigan, I expect to be able to turn on the lights, flip the switch, and have the lights come on. I expect to be able to go to my thermostat, and if it is cold outside, to turn it up and to have my house warm, and I expect to be able to turn the tap on, and to get water, right? Those are relatively simple things that we have all come to accept, and you do it at affordable prices.
What will happen is, yeah, if these things become too expensive in those types of things, the citizens are going to get upset. And I can tell the Dutch are already very good at conservation. They are not wasteful. I mean I think you can describe Americans as being wasteful for energy. We take it for granted, okay, but the Dutch I think are very good at conservation, and so if you tell them to turn the thermostat down a little bit more, keep the lights off, or [have] fewer lights [on], and all these types of things, it is kind of like, whoa, wait a minute, we already do a lot of this.
Robert R. Reilly:
What do you think the potential is in Europe for liquefied natural gas?
First of all, there is really not sufficient capacity there to receive it, is there? They do not have the terminals. They do not have the re-gasification plants.
Peter Hoekstra:
Right, so I mean I think there is tremendous potential for it, but that is one of the things that will take years to build out, okay? It is a very combustible product, so you have got to build it right, in a secure way. You have got to build the ships to transport it and these kinds of things. So yeah, that probably is a five- or ten-year plan, infrastructure plan, but the same thing is we need that infrastructure for LNG. We also need that infrastructure for our electrical grids, okay? If we are going to have every other house on a block with an electric car that is going to be charging at night, most of our electrical grid cannot carry that kind of capacity.
So [there are] lots of challenges, lots of opportunities, but it is going to require some decisive action and it is going to take us and Europe taking a very close look at what is going on right now. I mean it is a great object lesson, okay, here is what happens. What do we need to do to prepare so that this does not happen in the future?
Robert R. Reilly:
List those most important steps to be taken.
Peter Hoekstra:
Well, I think you have got to develop a balanced energy portfolio. The supply chain issue is across a whole range of products, but with energy we need to have a supply chain system in place so that there is sufficient supply in freedom-loving countries, alright, so that like for lithium, we are not dependent on China, okay? If we are going to go into battery technology, we have got to find supplies where we can get lithium from securely. It does not mean it has to be produced in the United States, but we have got to be able to provide it from freedom loving countries who are reliable, and then you have just got to build out the infrastructure to have that flexibility, electric grids, natural gas grids, a sharing of technology, and a commitment for all of us to move forward.
And Europe will move forward in certain areas. The U.S can move forward in other areas because we always use the statement, ‘we all breathe the same air,’ right, but then we put in place the same standards for the whole world, kind of. We try, okay? China does not have to meet the same standards that we do. Does it really make sense? Europe maybe ought to lead in one area, which means that, okay, this is what we should do for their environmental issues. The U.S is going to lead in other areas. This is going to be our environmental [regulations], but overall, what we are doing is we are producing a cleaner environment for all of us, so [it would be good to have] some flexibility in place.
Robert R. Reilly:
Well, we have discussed Europe, and certainly the Netherlands and the United States, but there are world markets for everything we have been talking about, so the liquefied natural gas is in great demand in Asia, and perhaps more so in Asia than in Europe, so that the bidding for it – because the capacity as you said to produce it has been fairly limited, has driven the price of that up quite high, which people are willing to pay because they want their lights to go on and their homes to be heated. It does not seem to me that these problems can be seen without keeping in mind the context of the world markets for these various kinds of energies.
It seems the only one that could really make you independent is nuclear. I mean I do not know enough about the potential for hydrogen that you are talking about, and I do not know if the United States is at the cusp of reconsidering nuclear energy because, of course, we, too, have been shutting down our nuclear plants, particularly in light of the fact that the technology for building these plants has changed considerably, making them safer and also being able to build smaller ones that could service smaller communities.
Peter Hoekstra:
No, that is right. In Michigan, we actually just closed a nuclear plant, and now there is a group that is petitioning for the permitting to reopen the plant, to do the upgrades, the maintenance and all of that, to restart the nuclear plant. And I think like you said the technology has changed dramatically. I do not even know when [we last built a nuclear plant]. When is the last time we built a nuclear plant in the U.S.? I do not even know if we have any under construction right now.
Again, this is one of the things that you would think a broad cross-section of the American people ought to be willing to agree on. It is a quote-unquote ‘clean energy.’ We are not discharging carbon dioxide or anything like this. Yes, you have got to be very, very careful if you go down that route, but it does not seem that [easy]. It seems like everything right now, everything is a political fight, you know? There is nothing that people can kind of wrap their hands around and say, okay, let’s do this.
And it is not the single shot problem to resolve it, but if you made a commitment to nuclear, you would drive down the cost because all of our nuclear plants are one-off. You build one, and then two years later you build another one, but what if you had the core design or whatever and said okay, we are going to build 20 of these instead of one.
Robert R. Reilly:
The cost goes down?
Peter Hoekstra:
Cost goes down, probably goes down, way down, and so it becomes more affordable. And how much of our energy does that then produce? So there are solutions out there.
Robert R. Reilly:
There are solutions. The same consideration of those solutions may or may not be compromised by the severity of the problem if it gets a lot worse, not so much in the United States because of our supplies, but most particularly in Europe and what the political forces there would undertake in response to it.
The number one thing we have already discussed is, of course, the policy regarding Ukraine and the sanctions against Russia, but then if it is severe enough, can they overcome their reluctance, even phobia, against nuclear power and fracking, and do what is necessary, or will it be sort of the socialist solution of restricting supply and rationing through setting prices, which will not simply distribute the misery and not solve the problem?
Peter Hoekstra:
We will have to wait and see, but you know, at the end of the day, citizens have a voice. I still remember interacting with a lot of Dutch folks, and Europeans think different about a lot of these issues than what we do. And it seemed the Dutch were always increasing one tax or another, the tax on road, the tax on gas. A couple times I would say to some of the Dutch that I work with, I just read they are raising your tax again. And here in the U.S., that would be a call to arms for the conservative movement, right, and probably a lot of Independents, saying, no, you are getting enough. In the Netherlands, it was too often, from my perspective being a conservative, too often I would hear, well, Pete, you do not understand. They would not be asking or raising our taxes if they did not need it. That is a different perspective than I have ever had, and it is kind of like, oh, okay.
Conclusion
Robert R. Reilly:
Well, I am afraid we are out of time right now, and I would like to thank our guest, Ambassador Peter Hoekstra, for joining us today to discuss: “Europe’s Energy Crisis: The Causes of It and Possible Solutions.” I invite our audience to go to the Westminster Institute website to see what other programs we have on offer, including those on the Ukraine-Russia situation, China, China and Taiwan, Japan, and various issues in the Middle East. Thank you for joining us. I am Robert Reilly.