The EU is gradually weaning itself from Russia’s energy dependence,It will give up most of its oil imports from Russia . The goal is to hurt Russia long-term by cutting off its biggest source of income, fossil fuel exports.
In the short term, however, the shift could hurt Western consumers while filling Russia’s coffers, analysts say.As evidence, they pointed outMarch. While the policy was designed to further isolate Russia, both economically and politically, it also immediately led to a surge in global oil prices, a boon for Russia. .
The European Union has vowed to reject Russian oil’s efforts and is expected to cut imports by about 1.5 million barrels a day, pushing up crude prices. That makes the expected sanctions counterproductive in the short term, analysts at Brussels-based think tank Bruegel said.
“[A]Russia’s oil sales to the EU will continue for several months, which is likely to boost Russia’s profits and provide a short-term boost to its government budget as the war rages,” they wrote in a recent article. column in politics.
Matteo Villa, an analyst at the ISPI think tank in Milan, believes that Russia’s oil embargo could eventually backfire. “The risk is that oil prices in general will go up because of European sanctions. If prices go up a lot, the risk is that Russia starts making more money and Europe loses the bet,” he told The Associated Press. .
DTN market analyst Troy Vincent told CBS MoneyWatch that because oil prices are determined by the global crude market, rising prices in Europe will soon affect Americans as well.
“Anything that happens anywhere in the world ultimately affects the American consumer in reverse,” he said.
Bad timing for consumers
In the U.S., the supply crunch comes at a time when oil prices typically rise — the unofficial start of the summer after Memorial Day, when millions of Americans hit the road for vacation.
The problem this year is that with U.S. oil demand surging and domestic refineries already nearing maximum capacity, there is little room to increase output, Vincent said.In addition, hurricanes season A start-up is underway that could cause some disruptions affecting crude oil production in the Gulf of Mexico, U.S. refineries on the Gulf and Atlantic coasts, or both.
“U.S. refineries are operating exceptionally hard, facing seasonal demand, a very active hurricane season, and the potential for unplanned refinery shutdowns,” he said.
Vincent predicts the average price of gasoline –– Can “easily” go up a dollar. GasBuddy analyst Patrick De Haan predicts average gasoline prices will top $5 by mid-June, while JPMorgan Chase says it could top $6 by late summer.
Ultimately, when consumers and businesses use less gas, whether by driving less, avoiding flights, or Turn on the thermostat– Economists call this “demand destruction.” So far, while Americans have said in surveys that they are driving less because of gas costs,
Vincent did not see the decline reflected in the data. Instead, many consumers cut spending on other products and services to offset the impact of soaring fuel costs on household budgets.
Russia’s “Doomsday Decline”
While consumers will be the short-term losers from the race for Russian oil, in the long run, Russia will suffer the most as Europe decouples from its energy sources. Analysts say Western countries are unlikely to end the embargo on their borders, but could further restrict the global market for Russian oil in the coming months and years.
“[W]We don’t think the issue has been resolved, but expect continued efforts in the U.S. and Europe to reduce Russia’s oil revenue from the rest of the world,” Height Securities analyst Benjamin Salisbury said in a note.
Sanctions in Europe are also aimed at blocking insurance companies that underwrite oil shipments, further reducing Russia’s ability to ship oil to other buyers.
Vincent said many European countries that agreed this week to reject Russian oil would not be in a rush to restart trade relations with Putin if there was a ceasefire in Ukraine.
Although “we may see India or China get some oil from Russia in response, it will not be enough to offset the total that will be displaced. This means that Russian oil production will eventually decline,” he added.