Ukraine-Russia War: Global Oil & Gas Impact
Russia’s invasion of Ukraine is still going strong. In the midst of all the strategic, geopolitical, and humanitarian concerns, much has been made of increasing crude oil prices and their effect. The influence is felt by everyone.
However, why is the wardriving up global crude oil prices?
Crude oil prices have already been climbing amid Russia’s President Vladimir Putin’s build-up of a special military operation in Ukraine’s Soviet-era component, supported externally by the US-led military alliance NATO (North Atlantic Treaty Organization). This was because the globe thought the conflict would prompt the West to impose an energy embargo on Russia.
Even before the United States and the United Kingdom imposed sanctions on Russian oil and gas supplies, some nations ceased purchases, while others engaged in panic purchasing. On March 7, prices jumped to a 14-year high of $140 a barrel. They have decreased little since then.
The rise in oil prices begs the question: Why is Russian gasoline important. Russia is the world’s third most significant producer of crude oil (behind the US and Saudi Arabia). It delivers 14% of global output to global markets or seven to eight million barrels of crude oil per day. The US and UK embargoes, as well as the refusal of several other pro-Ukraine nations to purchase Russian petroleum, exacerbate the issue. Supplies were already scarce.
It is uncertain if the sanctions imposed by the US and the European Union would succeed in transforming Russia into a “pariah state,” as Biden put it. If the sanctions are successful, they may convince Russia to relax its hold on Europe’s natural gas supply, even if the penalties are not immediately effective in defeating Russia’s aims in Ukraine.
Europe will want Russian gas in the foreseeable future, as shown by the lifting of the hold on Russian central bank assets to enable natural gas payments. However, when spring approaches and demand for heating fuel decreases, this need will quickly shrink.
Nobody knows where the Russia-Ukraine war will end. However, there are grounds to assume that the consequences on global energy markets will be less severe than widespread knowledge suggests.
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