Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

In 1973, the organization of Arab petroleum exporting countries instituted an oil embargo on the

United States, sending oil prices soaring.

This came at a difficult time for the United States,

as wholesale commodity prices were already rising more than 10% per year at the time,

and many important industrial materials were in short supply.

In addition, the US oil industry had very little

excess production capacity, which meant that it was difficult for US energy producers to bring

more oil to market when it was needed. In the aftermath of that oil shock, the United States

began seeking energy independence to prevent such problems occurring again in the future.

Over the same period, Europe became increasingly reliant on Russia for its energy needs.

So let's discuss why Europe relies so much on Russia for energy.

Could the West place an embargo on Russian oil and gas? Would

such an embargo make a difference to Russia? And to what extent would the Western nations

be harming themselves by doing this? So first up, the European Union is the world's largest

energy importer. They import 60% of their energy needs at a cost

of more than 350 billion euros a year. Right now Europe imports 40% of its natural gas supply

and more than 25% of its crude oil from Russia. In the 1960s and 70s, Europe was producing roughly the same amount

of natural gas that it was using. But production began to decrease as the North Sea gas fields

depleted and the Netherlands began shutting down their gas fields. These are the largest source

of natural gas in the EU,

but they were shut down due to earthquake activity. Over the last 20 years or so, the EU has

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