In this interview with Nour Amache from Asharq Business Bloomberg, Dr Carole Nakhle, CEO of Crystol Energy, discusses the potential consequences if Russia decides to cut off its energy supplies to the world.
Dr Nakhle explains that we should expect all scenarios including the loss – total or partial – of Russian energy exports, either through embargos or deliberate retaliation. The fear of potential loss of supplies is keeping prices elevated. Currently, there has been no shortage in supply but traders are shying away from Russian oil in the fear of sanctions.
This is, however, not the first time that the oil market faces a crisis on that scale. In the 1970s, the situation was even worse in terms of escalation of prices which rose by more than 300% over a few months, and in summer 2008 prices exceeded $164 per barrel in real terms.
We should, of course, expect demand to react to such levels, but demand is much less understood than supply. What we know, however, is that there is a time lag between demand destruction taking place and market players realising it, which typically leads to a decline in prices.
It is ironic that the US is turning to Venezuela and Iran when it is sitting on massive oil and gas resources. Venezuela’s oil industry has suffered for years and the situation has worsened under the sanctions, leading to significant loss of productive capacity that will take time to revive. It seems that the US is trying to send a calming signal that alternative supplies to Russian oil can always be found.
Watch the discussion (in Arabic):
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