Most of Russia’s roughly five million barrels of daily oil exports go to Europe. About 700,000 barrels a day are consumed in the United States, roughly 4 percent of the U.S. market.
Several Scandinavian refiners, including Neste Oyj of Finland and Preem of Sweden, have said they halted purchases of Russian oil.
“Due to the current situation and uncertainty in the market, Neste has mostly replaced Russian crude oil with other crudes, such as North Sea oil,” said Theodore Rolfvondenbaumen, a Neste spokesman. As the company watches future sanctions and “potential countersanctions,” he said, it is preparing “for various options in procurement, production and logistics.”
Energy experts say the international oil trade could be rejiggered in ways that are similar to what happened in 1956 when Britain, France and Israel attacked Egypt and closed the Suez Canal. For a time, oil tankers were rerouted around Africa. Similarly, over the next few months Russian oil once shipped to Europe could go to China.
Russia’s Attack on Ukraine and the Global Economy
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A rising concern. Russia’s attack on Ukraine could cause dizzying spikes in prices for energy and food and could spook investors. The economic damage from supply disruptions and economic sanctions would be severe in some countries and industries and unnoticed in others.
The cost of energy. Oil prices already are the highest since 2014, and they have risen as the conflict has escalated. Russia is the third-largest producer of oil, providing roughly one of every 10 barrels the global economy consumes.
Gas supplies. Europe gets nearly 40 percent of its natural gas from Russia, and it is likely to be walloped with higher heating bills. Natural gas reserves are running low, and European leaders have accused Russia’s president, Vladimir V. Putin, of reducing supplies to gain a political edge.
Shortages of essential metals. The price of palladium, used in automotive exhaust systems and mobile phones, has been soaring amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, another key Russian export, has also been rising.
Financial turmoil. Global banks are bracing for the effects of sanctions designed to restrict Russia’s access to foreign capital and limit its ability to process payments in dollars, euros and other currencies crucial for trade. Banks are also on alert for retaliatory cyberattacks by Russia.
“The trade-off could take six to eight weeks,” said Michael Lynch, president of Strategic Energy and Economic Research, who is an occasional adviser to the Organization of the Petroleum Exporting Countries. “For a week or two, things could be unsettled.”
Mr. Lynch said the decision by European buyers to move away from Russian oil would give China and its president, Xi Jinping, more sway and influence in the energy market and with Mr. Putin.
“If China wants to, they can use the power of their purse to either humiliate Putin by denying him a customer or to elevate him by bailing him out financially,” he said.
Article source: https://www.nytimes.com/2022/03/01/business/energy-environment/russia-oil-price.html
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