Russian oil has an increasing problem finding buyers in the market, and Western sanctions have not yet affected oil imports from Russia. However, such a proposal is already on the table and immediately on Monday frightened stock market investors. They fear the effects of commodity shortages. According to some analysts, the failure of Russian barrels would even cause an oil crisis of a similar magnitude as in the 1970s.
Russia is one of the world’s largest oil exporters, exporting about 7.5 million barrels of oil and refined products daily. The sanctions imposed by the United States and its allies on the Russian financial system over the attack on Ukraine have not yet targeted Russian barrel imports, but this option is already under way. A possible ban is currently being considered by Europe and the United States, and according to a Kyoto source, the Japanese government is also considering it.
However, according to estimates by the US financial institution JPMorgan, buyers cannot find up to 66 percent of Russian exports, ie over five million barrels a day. This is because traders refuse to trade with Russians for prudential or reputational reasons.
Concerns about oil shortages and the associated slowdown in economic growth are causing the world’s stock markets to collapse. On Monday, the stock markets in Asia reached many-month lows, and the slump continues in Europe. At the same time, the Russian stock exchange itself remains closed in the new trading week due to fears of massive sales and a fatal fall in the prices of all traded shares.
Oil prices themselves are also responding to the situation, having already exceeded $ 100 a barrel last week and continue to rise. In response to a possible reduction in imports from Russia, they reached close to the 2008 high on Monday, almost $ 140 a barrel for Brent North Sea crude oil.
“A boycott would put enormous pressure on oil and gas supplies, which have already felt the impact of growing demand,” CMC Markets analysts said, according to Reuters. “Prices are likely to rise in the short term, with a move toward $ 150 a barrel not ruled out. warned.
Also, according to IHS Vice President Markit Daniel Yergin, the decline of Russian barrels can have a significant impact on the world market. “From a logistics point of view, it would be a really big disruption and people would fight for barrels,” says Yergin. “It’s a supply crisis. It’s a logistical crisis. It’s a payment crisis and it could also reach the scale of the 1970s.” he pointed out for the CNBC TV server.
In 1973, producers in the Middle East cut off supplies to the United States and other Western countries to help Israel during the Arab-Israeli war. There was an immediate shortage of oil, and Americans lined up at gas stations to buy gasoline, the price of which rose sharply.
Another shock was the Iranian revolution of 1978 and 1979, which overthrew the Shah of Iran.
The miners learned from the 1970s, others disagree
On the other hand, analyst Petr Bartoň from Natland is not afraid of a crisis similar to the one in the 1970s, precisely on the basis of experience already gained.
According to the analyst, it does not look like the rest of the world is willing to increase production to replace the missing Russian oil. “The United States cannot increase production much, but the United Arab Emirates and Saudi Arabia have the capacity to expand. It will only take a while before they can technically renew them, many of them are still dampened by the large drop in consumption during the covid. But within six “Markets will react quickly, the price will stop rising not only when production increases, but already when mining increases are announced,” Bartoň believes.
According to Bartona, it would be crucial if the rest of the world announced a departure from Russian oil, paradoxically for a longer period. “The renewal of production capacities requires significant investments, and no investor wants to undertake this if there is a ‘danger’ that Russian oil exports will resume soon,” explains an analyst for the online daily Aktuálně.cz.
“So the more permanent the oil cut looks like, the greater the willingness of the rest of the countries to invest in increasing production. They know – and they learned in the 1970s – that long-term high oil prices are not in their best interests. “It will adapt and cease to be so dependent on oil. As in the 1970s. And that is the last thing the miners would like,” concludes Barton.
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