Oil Prices and EU Energy Crisis

In this interview with Cyba Audi from Asharq Business Bloomberg, Dr Carole Nakhle, CEO of Crystol Energy, discusses the current drivers of the oil price and the EU’s response to the energy crisis.

Several factors are leading to the bearish movement in oil prices witnessed at the beginning of this month. On the supply side, the fears of severe disruptions in Russian oil exports due to sanctions or Russia cutting its exports have somehow eased compared to the beginning of the invasion of Ukraine. Additionally, the US and the International Energy Agency (IEA) have agreed to release historic volumes of their strategic petroleum reserves.

On the demand side, China is reimposing localised lockdowns amid surges of Covid-19 cases which will reduce mobility and, thus, the demand on oil for transport. Globally, slowing economic growth is a major downside risk. When combining all these factors and developments, we can clearly see why we had this bearish movement in the oil prices in the past week. However, this does not mean that the crisis is over and the market still has the potential to react in any direction.

On the EU’s energy response to the invasion, Dr Nakhle argues that the crisis in Ukraine had reflected a much-coordinated EU response, namely from the political side to a larger extent. The problem in this economic bloc is that individual countries have varying dependency levels on gas and other primary energy sources as well as on Russian gas. This is why individual countries will have diverging approaches to handling the geopolitical dimension. The EU cannot completely replace Russian gas and oil exports overnight but it is heading in the direction of reducing its dependence on Russian energy exports significantly.