In this interview with CNBC Arabia, Dr Carole Nakhle, CEO of Crystol Energy, discusses the implications of the Russian-Ukrainian conflict on the energy markets and world economy.
On whether Russia might cut off its gas supplies to Europe, Dr Nakhle stresses that every scenario is possible and each has a different outcome. Any miscalculations will lead to unprecedented consequences and possibly everyone will lose. Europe is Russia’s biggest and most lucrative gas market. Although Russia remains Europe’s biggest gas supplier, Europe has diversified its import sources and has increased its reliance on LNG. In this respect, Russia needs Europe more than Europe needs Russia.
Market reaction will entail additional supplies from other suppliers such as Qatar, Algeria, Norway and the United States, which is probably the biggest winner of the current crisis. Also, there is fuel substitution, primarily from gas to coal (bad news for the climate) and to a lesser extent oil. Additionally, demand will react to higher prices. These dynamics will help in resolving crisis in the coming months especially as temperatures rise in the continent.
On a final note, Dr Nakhle argues that an escalation of the crisis will negatively impact economic growth, especially as it involves important economic actors. The IMF, in its latest economic outlook, revised its economic growth forecasts downwards for most of the large economies in the world; and that without accounting for the geopolitical crisis in Europe.
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