How important is Russian oil and how high could prices go?
A western embargo on Russian oil and gas is no longer unthinkable after the US secretary of state, Antony Blinken, revealed that the idea was gaining traction in the White House and had been the subject of “very active discussion” with allies.
The reaction was dramatic, with Brent crude oil hitting levels not seen since 2008, while gas soared to all-time highs as traders considered whether it could be thrown into the mix too.
Pushback from Germany’s new chancellor, Olaf Scholz, came as no surprise given his country’s heavy reliance on Russian oil and gas. “Supplying Europe with energy for heat generation, mobility, electricity supply and industry cannot be secured in any other way at the moment,” he said.
Meanwhile, consumers’ money is funding the war in Ukraine. EU oil purchases alone are putting $285m a day into Russian pockets, according to the Brussels-based NGO Transport Environment. So how realistic is a ban and how high could prices go?
Up to 40% of Europe’s gas comes from Russia, a reliance that has already been in sharp focus during the colder winter months. As warmer days arrive and the immediate need for gas diminishes, it should be remembered that the picture isn’t all that different for crude oil and other petroleum products. About 5m barrels per day (bpd) flow out of Russia, the world’s second largest exporter after Saudi Arabia.
About half goes to the EU, which relies on Russia for 27% of its imports and about 15% of its total consumption. The UK is less dependent, importing 4.7m tonnes of Russian oil in 2021, just under 100,000 bpd, which was less than 10% of consumption.
But, as with gas, the UK cannot escape the impact of global market prices for commodities, which would filter through into much higher costs
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