Dr Nakhle argues that volatility should continue to be expected in energy markets, particularly oil given the prevailing level of uncertainty.
So far, sanctions have spared Russian oil and gas exports, with the exception of the US, Canada and UK embargo on oil which has a minimal effect, and Russia still hasn’t cut off its energy exports. But some traders are shying away from Russian crude resulting in substantial under-pricing of the fuel, while additional supplies are not coming fast enough to the market. The negotiations with Iran have faced some setbacks.
Dr Nakhle adds that energy and politics are closely intertwined, specifically oil – a strategic commodity. OPEC+’s neutral stance is partially understood as they have a point in terms of no major supply disruptions took place. However, since the organisation blames ‘fear’ as the driver for where prices are, one can at least expect from the group to act as a calming force for the sake of the producers’ group much trumpeted market stabilisation mission.
On the impact of the rise in oil prices on the MENA region, Dr Nakhle says the picture is divergent. The net oil exporters, such as Saudi Arabia, the UAE, and Kuwait, are recouping greater export revenues, which help them to alleviate the inflationary pressure of imported commodities such as grain. Net oil importers, in contrast, are vulnerable; the rise in energy and food prices will worsen the living standards particularly of the poorer countries and it could also lead to social unrest.
There is no immediate alternative for Russian oil and gas in Europe. Europeans have been decreasing their reliance on these exports and have managed to do so to a certain extent since the 1990s. If Europe doesn’t want Russian oil, that oil will find a way back into the market given the fungible nature of the commodity. However, with gas, things are more complicated. Not only for Europe but also for Russia. For instance, most of Russia’s gas exports are via pipelines and to Europe. Such infrastructure is not readily available in other markets.
Watch the discussion:
“No endgame for Ukraine“, Christof Rühl, Feb 2022
“The EU’s 4th round of sanctions on Russia“, Dr Carole Nakhle, Mar 2022
“Recent political developments in Ukraine“, Christof Rühl, Mar 2022
“Russia-Ukraine crisis and oil prices“, Dr Carole Nakhle, Mar 2022
“Can Europe completely cut its reliance on Russian energy supplies?“, Dr Carole Nakhle, Mar 2022
“Russia, OPEC+, Europe and Energy Markets“, Dr Carole Nakhle, Mar 2022
“EU Energy Policy amidst the Current Gas Crisis“, Dr Carole Nakhle, Feb 2022