Dr Nakhle stresses that the current situation engages some kind of guesswork, and especially when it comes to the definition of what a military action entails. Is it going to be a small incursion or a fully-fledged war? All scenarios are possible, each with different implications on economy and energy markets. If we are, for example, talking about an immediate reaction, we are going to see spikes in prices; however, depending on the extent of the crisis we might see the opposite impact.
She then explains that a military action initiated by Russia will most likely lead to sanctions on the country, although the effectiveness of them remains questionable. However, it is unlikely that the sanctions will target energy supplies as we are already in a very tight market, but rather specific projects, including those in energy.
Dr Nakhle further comments on the geopolitical risk premium, highlighting that no one knows exactly how much of it is already been factored in prices. There are expectations that over the longer term, geopolitics are likely to ease the pressure, especially with more supplies expected to hit the market in the second half of this year. US shale seems to be coming back. Iran remains also a question, with more supplies added to the market if a deal is to be reached.
“A suspenseful start for oil prices in 2022“, Dr Carole Nakhle, Feb 2022
“European gas crunch: Calm before the storm?“, Dr Carole Nakhle, Dec 2021
“Oil markets: What crisis?“, Dr Carole Nakhle, Nov 2021
“An Energy Crisis Like No Other“, Lord Howell, Oct 2021
“EU Energy Policy amidst the Current Gas Crisis“, Dr Carole Nakhle, Feb 2022
“Global Economy and Energy Markets Weekly Commentary – 13th Feb ’22“, Christof Rühl, Feb 2022
“Did Russia deliberately cause the gas crisis in Europe?“, Dr Carole Nakhle, Jan 2022