EU’s efforts to control energy costs are like a Ponzi scheme, says former Trump energy secretary

Some of the measures European governments have taken to keep electricity costs down can be described as a “Ponzi scheme,” said Dan Brouillette, who served as energy secretary under the Trump administration.

“One of the easiest policy tools if you want is you can approve a bill, borrow money and give money to citizens to pay their electric bills,” Brouilette told CNBC’s Hadley Gamble on Monday on the sidelines of the Gastech conference. in Milan.

Brouillette warned of the “inflationary impact” of such measures should governments adopt such policies to deal with the price hike.

When asked whether such measures resemble a Ponzi scheme, Brouillette replied: “That’s how you could describe it. There’s no question.”

“It relieves the immediate pain of not being able to pay the electric bill, but the money just moves in a circle… It just goes from the consumer to the electric company… it’s not a long-term solution,” he added. ready.

EU energy ministers will meet on Friday to discuss ways to curb rising gas prices.

Gas prices in Europe rose 30% on Monday after Russia announced that the main gas supply pipeline would remain closed indefinitely. Europe has seen a sharp decline in gas exports from Russia, traditionally the largest energy supplier, in recent months.

The former energy minister said consumers can expect higher energy prices in the near term.

Oil markets around the world are “very tight,” and more oil will be used for heating and other purposes as winter approaches, Brouillette said. The prospect of an energy shortage comes as Saudi Arabia hints at cutting its oil production.

The answer to reducing scarcity is to “produce more,” Brouillette said.

“If we can produce more, develop more infrastructure in the United States, in Europe — that’s the ultimate answer to the questions.” He said it is important for the United States to return to pre-pandemic production levels.

“We’re still about…a million barrels a day short of what we were producing two and a half, three years ago. So I think it’s very important that we get back to that number.”

Joseph McMonigle, secretary general of the International Energy Forum, also said oil supply is still lagging behind demand. “A lot of people think the supply-demand gap is just OPEC or OPEC+, but half of that still comes from US producers,” he told CNBC’s Capital Connection on Monday.

Brouillette added that it was a “strange request from the” [Biden] government” to encourage U.S. oil producers to halt exports and prioritize U.S. consumers.

US Secretary of Energy Jennifer Granholm recently urged the country’s refineries to curtail fuel exports and build fuel stocks instead.

Brouillette said such a move is “impossible” because the oil market is in “backwardation”. Backwardation is when the current price of a commodity is trading higher than the futures price. According to him, this means that producers have more incentives to market their product. He added that publicly traded companies in America have fiduciary responsibilities to their shareholders.