EU Measures To Curb Energy Costs Resemble a “Ponzi Scheme”, Says Former Trump Energy Secretary

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Former U.S. Deputy Secretary of Energy Dan Brouillette speaks with journalist during a media roundtable session in Tokyo Monday Oct. 22, 2018. A top U.S. energy official says Asia is the center of growth in energy demand and offers a great opportunity to expand American liquefied natural gas exports. Brouillette told reporters Monday that the U.S. is working with Japan and others to build facilities for U.S. LNG exports and improve their energy security. Japan is the world's biggest importer of LNG.(AP Photo/Mari Yamaguchi)
Former U.S. Deputy Secretary of Energy Dan Brouillette speaks with journalist during a media roundtable session in Tokyo Monday Oct. 22, 2018. A top U.S. energy official says Asia is the center of growth in energy demand and offers a great opportunity to expand American liquefied natural gas exports. Brouillette told reporters Monday that the U.S. is working with Japan and others to build facilities for U.S. LNG exports and improve their energy security. Japan is the world's biggest importer of LNG.(AP Photo/Mari Yamaguchi)

Measures that European governments have taken to keep electricity costs lower are a “Ponzi scheme,” said Dan Brouillette, former energy secretary under the Trump administration.

“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,” Brouillette told CNBC’s Hadley Gamble on the sidelines of the Gastech conference in Milan on Monday.

Brouillette warned of the “inflationary impact” of such measures. When asked if these measures resemble a Ponzi scheme, Brouillette replied, “You could describe it that way. There’s no question about that.”

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“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.

The EU countries’ energy ministers will meet on Friday to discuss methods to tame soaring gas prices.

Europe’s gas prices skyrocketed 30% higher on Monday after Russia announced the indefinite shutdown of its main gas supply pipeline. Europe, in recent months, sufered a sharp drop in gas exports from Russia, traditionally its largest energy supplier.

Meanwhile, the former energy secretary said consumers could expect higher energy prices in the near term.

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

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

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

“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.”

Joseph McMonigle, secretary-general of the International Energy Forum, also said that oil supply is still lagging behind 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,” he told CNBC’s “Capital Connection” on Monday.