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Former Trump energy secretary says EU efforts to regulate energy costs are such as a Ponzi scheme

Watch CNBC's full interview with former U.S. Energy Secretary Dan Brouillette

A few of the measures that European governments took to help keep electricity costs down serves as a a “Ponzi scheme,” in accordance with Dan Brouillette, who served as energy secretary beneath the Trump administration.

“Among the easiest policy levers in the event that you will, is you could pass a bill, appropriate money and present money to citizens to cover their electric bills,” Brouillette told CNBC’s Hadley Gamble on the sidelines of the Gastech conference in Milan on Monday.

Brouillette happens to be president of liquid gas company Sempra Infrastructure. Bloomberg reported on Monday that NORTH PARK, California-based Sempra is in foretells sell LNG into Europe and is considering joint ventures to create LNG terminals there.

When asked about whether Europe’s measures resemble a Ponzi scheme, Brouillette replied, “You can describe it this way. There is no question about this.”

“It alleviates the immediate pain of not having the ability to pay the electricity bill, however the money just moves in a circle It just goes from the buyer to the electricity company it isn’t a long-term solution,” he added.

The EU countries’ energy ministers will meet on Friday to go over solutions to control surging gas prices.

Europe’s gas prices jumped 30% higher on Monday after Russia announced that its main gas supply pipeline would remain shut indefinitely. Europe lately endured a sharp drop in gas exports from Russia, traditionally its largest energy supplier.

‘Produce more’

The former energy secretary said consumers can get higher energy prices in the near term.

Oil markets all over the world are “very tight,” and much more oil will probably be useful for heating along with other purposes as winter approaches, said Brouillette. The chance of a power squeeze comes as Saudi Arabia hints at cutting its oil output.

The solution to alleviating the scarcity would be to “produce more,” said Brouillette.

There's a 'false calm' about oil markets, says International Energy Forum's secretary-general

“If we are able to produce more, create more infrastructure development in the usa, in Europe this is the ultimate response to the questions.” He said it is important that america go back to pre-pandemic degrees of production.

“We have been still roughly a million . 5 barrels short each day of what we were producing just two . 5, 3 years ago. THEREFORE I think it is rather important that people make contact with that number.”

Joseph McMonigle, secretary-general of the International Energy Forum, also said that oil supply continues to be lagging behind demand. “Many people think the gap between supply and demand is all OPEC or OPEC+ but 1 / 2 of that’s still from U.S. producers,” he told CNBC’s “Capital Connection” on Monday.

EU energy chief urges China and India to support a price cap on Russian oil

Brouillette added that it had been a “strange request by the [Biden] administration” to encourage U.S. oil producers to avoid their exports and prioritize American consumers.

U.S. energy secretary Jennifer Granholm recently urged the country’s refiners to limit fuel exports, also to build fuel inventories instead.

Brouillette said this type of move is “impossible,” as the oil market is in “backwardation.” Backwardation is once the current price of a commodity is trading greater than its futures price. That, in accordance with him, implies that producers have significantly more incentives to place their product available on the market. He added that publicly traded companies which are in the us have fiduciary responsibilities with their shareholders.

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