Weekly Brief: The Race for Oil

Brief Explanation

As the invasion of Ukraine extends onto the fifth week, oil continues to be the focal point of many countries. After the invasion of Ukraine was officially confirmed, the price of crude oil surged to more than 130$ per barrel. Moreover, with Russia being such a large exporter of crude oil, countries, and regions that heavily depend on Russian oil hesitated to voice their support for Ukraine early on in the invasion. One of these regions is Europe. As it turns out, Europe is the largest buyer of Russian oil buying a whopping 42 percent of Russia’s total oil production in 2021, three times more than the second-largest buyer China.

Race to reduce dependency on Russian oil

Russia utilized the soft power it holds on countries and regions that import Russian oil on March 23rd. President Vladimir Putin announced his intentions to force unfriendly countries to buy Russian crude oil only in Rubles, causing the gas prices in Europe to soar. After the announcement, countries that were already working towards reducing their dependency on Russian oil scrambled to speed up the process, with Europe planning a “Green Deal” to reduce its dependency on Russian oil in haste.

Temporary solution?

On March 31st, President Joe Biden announced the largest release of oil from the United States emergency oil reserve and further spurred oil companies to ramp up drilling in a bid to stabilize the price of oil. The move, set to start in May of 2022, will see the release of 1 million barrels of crude oil per day for six months, amounting to 180 million barrels by the end. However, many experts call the release only a temporary solution that will not solve the problem.

The future of Russian oil exports?

As countries that previously depended on Russian oil, energy, and fossil fuels scramble to reduce their dependence on Russia, many are left wondering about the future of Russian oil exports. While most countries oppose the import of Russian oil during these times, some countries accept it with open arms. One such country is India, which saw a significant increase in its import of Russian oil since the beginning of the invasion of Ukraine. Leaving many to wonder who else will continue buying or start buying Russian oil at a discount?

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References

Alper, A., & Gardner, T. (2022, April 1). Biden spurs record emergency oil release in “moment of peril” for world. Reuters. https://www.reuters.com/business/energy/biden-release-1-mln-barrels-oil-day-ease-pump-prices-2022-03-31/

Chestney, N. (2022, March 24). Putin wants “unfriendly” countries to pay for Russian gas in roubles. Reuters. https://www.reuters.com/business/energy/putin-says-russia-will-start-selling-gas-unfriendly-countries-roubles-2022-03-23/

Elbein, S. (2022, March 11). Countries with the most Russian oil imports. TheHill. Retrieved April 2, 2022, from https://thehill.com/policy/energy-environment/597882-here-are-the-countries-that-import-the-most-russian-oil/

Sara Schonhardt, E&E News. (2022, March 9). Europe Races to Break Energy Ties with Russia. Scientific American. https://www.scientificamerican.com/article/europe-races-to-break-energy-ties-with-russia/

Verma, N. (2022, March 31). EXCLUSIVE U.S. warns India, others against sharp rise in Russian oil imports -official. Reuters. Retrieved April 2, 2022, from https://www.reuters.com/world/exclusive-us-warns-india-others-against-sharp-rise-russian-oil-imports-official-2022-03-30/