No alternative to Russian oil, OPEC tells EU — Analysis
According to the oil export cartel, sanctions against Russia could cause a major catastrophe
OPEC Secretary General Mohammed Barkindo said on Monday that current and future sanctions against Russia could lead to one of the most severe oil supply shocks ever recorded. He also warned EU officials about the possibility of a repeat of such an oil shortage. Barkindo stated that 7 million barrels per day of Russian oil are being removed from the global market because of Russian trade restrictions and sanctions.
The OPEC official also told the EU that the current volatility in the market is due to “non-fundamental factors” beyond OPEC’s control and that it is the responsibility of the EU to promote a “Realism is possible” approach to energy transition.
EU officials announced they would join US, UK and Canada in placing an embargo upon Russian energy products. But, Europe is dependent on Russia for its majority energy supply, so a ban could lead to catastrophic consequences. Experts have also warned against the possibility of the UK and the US imposing an embargo on Russian products. In particular, Germany is anticipating the collapse of entire industries, while the head of Austrian energy giant OMV has declared it would be “Impossible” for his country to quit buying Russian gas.
While the US has promised to step up and fill the gaps with its more expensive liquefied natural gas exports, most of Europe’s LNG terminals are already operating at capacity, meaning there would be no place to store the fuel. Others are keen to take advantage of the crisis to expand their efforts to develop renewable fuels.
The EU Parliament has approved a total Russian energy ban
However, last week, the European Parliament called on Russia to immediately and completely embargo all imports of oil and coal as well as natural gas and nuclear fuel. This could have an adverse impact on European standard of living and will likely be enforced. Hungary and Slovakia are two examples of countries that have stated they intend to disregard the ban for their own self-preservation. Others have advised their citizens to buckle up and be ready to face difficult times.
Oil and gas aren’t the only commodities whose supply is drying up amid the war in Ukraine. Russia and Ukraine together produce about a third of the world’s wheat exports, and both countries are also major exporters of sunflower oil and fertilizer. Food prices are at an all-time high and several countries, NGOs, have warned of rising food costs.