News | Story

Long-term uncertainty over Russian oil and gas will sustain high energy prices

Long-term uncertainty over Russian oil and gas will sustain high energy prices

The choice by Moscow to intensify its eight-year struggle in Ukraine has triggered a worldwide energy crisis, according to MEED, a GlobalData analyst. The effect of this battle, according to the data and analytics business, is reminiscent of the oil crisis of the 1970s, which ushered in the Gulf’s first significant economic boom.

According to Richard Thompson, Editorial Director at GlobalData’s Middle East Energy Development, “While the Gulf’s oil producers are keen to avoid taking sides in the Ukraine conflict, long-term uncertainty about Russian oil and gas supplies will sustain high energy prices for a prolonged period and create a renewed focus on Middle East hydrocarbons that will underpin a new economic and project boom in the Gulf.”

It was the immediate aftermath of Russia’s invasion of Ukraine that caused significant volatility in global stock markets and a jump in commodity prices, adding to inflation worries that were already threatening the global recovery. The strategic consequence of the crisis, on the other hand, is that it has brought to light Europe’s excessive reliance on Russian energy, especially gas.

READ:  Russia Attack On Ukraine Speeds Up European Energy Transition

This will lead to a strategic realignment of global energy in the next months and years, as well as a diversification of European energy supplies away from Russian oil and gas supplies toward alternate sources such as renewable and nuclear energy as well as hydrocarbons from the Middle East.

“In the long run, unless a peaceful solution is found in Ukraine soon, Moscow’s activities in Ukraine will result in Russian oil and gas exports being restricted or possibly completely barred from the global energy supply chain,” Thompson said. It is expected that the amount to which the United States and other Western countries restrict Russia’s oil and gas shipments would determine the magnitude and speed of the decrease. This will expose Europe’s reliance on Russia even more, according to the report.

In response to the mere prospect of oil and gas sales from the world’s third-largest oil producer and second-largest natural gas producer being removed from the international market, oil prices soared to nearly $138 a barrel on March 7, their highest level since 2008 and nearly 45 percent higher than at the start of the financial meltdown in 2008.

READ:  Oil Agencies Split on Impact of Russian Invasion

High energy costs will remain in place as long as the war continues and Moscow continues to be sanctioned, as well as long as Europe remains reliant on Russian oil and gas supplies. Oil prices have risen dramatically in recent months, resulting in a financial bonanza for Middle East oil exporters, who will use the money to expedite post-pandemic stimulus projects in 2022.

With growing inflation causing significant economic headwinds for the global economy, Middle East oil and gas will become more important in order to maintain the stability of the world’s energy markets in the long run.

“With its liquefied natural gas (LNG) expansion program currently underway, Qatar is well-positioned to become a major natural gas supplier to Europe, while Saudi Arabia, the United Arab Emirates (UAE), and the region’s other oil and gas producers are well-positioned to increase their supplies of low-cost energy,” Thompson concludes. Meanwhile, increased attempts will be made in Libya, Iraq, and Algeria to bring their hydrocarbon resources back online on a significant scale.”

READ:  China Is Spoilt for Choice of Oil

The oil producers in the Gulf of Mexico have huge amounts of low-cost oil and natural gas reserves. Over the course of four decades, they have established themselves as dependable and steady suppliers, and they are now spending extensively in order to enhance production capacity.

“Their investment in renewable energy and future fuel technology, such as hydrogen, provides an important ‘green’ angle that aligns with international climate change action as well as the environmental, social, and governance (ESG) criteria sought by multinational corporations and institutional investors,” Thompson continues.


Your email address will not be published.