Russian-Ukrainian crisis: what future for world energy prices? | Energy
Russia’s invasion of Ukraine drives global energy prices higher as oil surges above $100 a barrel.
Russia’s invasion of Ukraine is driving up pump prices for consumers around the world.
Oil prices rose to their highest level since 2014 on Thursday after Russian President Vladimir Putin ordered a full-scale military attack on Ukraine, prompting widespread international condemnation.
Brent crude futures jumped 5.4% to top $100 a barrel for the first time since September 2014.
Many analysts expect prices to rise much further amid fears of a major disruption to global energy supplies.
How high will the prices go?
“The next day will be quite critical – will definitely see prices break above 100/bps in the coming weeks,” Carlos Casanova, senior Asia economist at UBP in Hong Kong, told Al Jazeera.
“In the event that the U.S. supply or talks in Vienna do not go as planned, this could lead to further appreciation pressures in the $150-$170 range,” Casanova said, referring to the talks. in Vienna aimed at reviving the Iranian nuclear deal, which would give a new impetus to the offer.
“The impact will be felt via sentiment and rising global inflation.”
Jeffrey Halley, senior market analyst for Asia-Pacific at OANDA, said he expects prices to rise further once the market digests the full implications of the Russian invasion.
“A move above $100 seems inevitable, and I think a move in Brent to $120.00 is not out of the question based on my previous ad nauseum comments,” Halley said in a note Thursday.
In January, a group of economists at JPMorgan Chase & Co. predicted that a push to $150 a barrel would cut global economic growth by more than three-quarters, to less than 1% in the first half.
Energy prices had already soared in recent months amid a confluence of factors including the pandemic, tight supply and rising tensions between Russia and Ukraine.
In the United States, which is struggling with its highest inflation since the early 1980s, the average national price of gasoline is $3.52 per gallon (3.8 liters), in up nearly 90 cents since last year, according to GasBuddy.
Where does the United States and the world get its oil?
Russia is the world’s third-largest oil producer and second-largest natural gas producer, ranking among the top energy suppliers to the United States and China, the world’s two largest economies.
In 2020, Russia supplied 7% of US oil and crude oil imports, making it the country’s third-largest supplier alongside Saudi Arabia.
This is likely one of the reasons the United States has signaled in recent days that sanctions against Russia would not target the country’s energy sector.
Despite this, US President Joe Biden on Thursday announced sanctions against a company building the $11 billion Nord Stream 2 gas pipeline, which is not yet in service. Biden has promised to impose new “tough sanctions” on Moscow soon in coordination with allied countries.
Even sanctions that do not specifically target the energy market could indirectly hamper oil and natural gas exports or prompt Moscow to retaliate by limiting supply.
The war in Ukraine could also disrupt the country’s main pipelines that supply Europe with natural gas.
Trinh Ng, senior economist at Natixis in Hong Kong, said “people should expect higher prices.”
“For net oil importers, prices will go up. The question is who will absorb it? As in, will governments subsidize households and businesses? Trinh told Al Jazeera.
“Anyway, it will be expensive. I suspect some countries will try to keep prices on course through subsidies to mitigate the impact, but overall inflationary pressures will increase, especially in countries where demand is improving, such as Southeast Asia and India.