With the ongoing war in Europe, the impact of Ukraine-Russia crisis in the global oil & gas sector is staggeringly expensive.
Amid the intensifying crisis between Russia and the West on the Ukrainian border, Europe’s and Russia’s long-standing energy reliance on one another has become a significant negotiating chip for both parties.
Russia’s gas and oil-rich territory are connected to European energy markets by several critical pipelines. The largest runs through Ukraine and has become a stumbling block for both sides in discussions to prevent the escalating crisis. Gas deliveries to Europe through Ukrainian pipelines decreased last year, and worries of more delays have increased in response to Russia’s deployment of soldiers along the Ukrainian border.
Disruptions to any of Europe’s four major gas pipelines — Nord Stream, Yamal, Ukraine, or Turkstream — as well as a delay in the approval of Nord Stream 2 — may plunge the continent into an energy catastrophe. This year’s winter has already seen that high energy costs in Europe have soared due to low gas storage levels, high carbon pricing in the European Union, a shortage of LNG tankers, and lower than usual Russian gas supplies.
Additional interruptions to energy imports would spell difficulty for the continent, which has become more dependent on foreign energy supplies in the face of a home concentration on green energy development. Although complete isolation of Ukraine would directly impact just a few nations (Slovakia, Austria, and Italy), the impact of the Russian gas disruption affects the entire global gas market.
In the long term, it is evident that rising energy prices and continued energy insecurity in the EU will result in increased manufacturing and other expenses and inflation. This crisis may serve as an opportunity for Europe to accelerate its net-zero goals. Longer ahead, Asia will account for most of the long-term growth in the global market, with gas replacing coal to keep up with demand and curb emissions.
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