The cost to a country of oil production also plays an important role. The United States, a new competitor in oil production, spends $ 40 a barrel on oil production. Russia and Saudi Arabia spend $ 20 and $ 15 a barrel on crude oil, respectively.
Udit Misra
Looming oil crisis What now: US President Joe Biden announced on Tuesday that the United States would ban all imports of crude oil and natural gas from Russia as Russia’s invasion of Ukraine intensifies. The United Kingdom has announced it will suspend all crude oil imports from Russia by the end of this year.
This announcement will further raise the price of crude oil. This price increase will increase inflation around the world. The impact of these decisions is expected to be greater, especially in the United States and its European allies. The sanctions, imposed on Russia, the world’s second-largest crude oil producer and exporter, will have various repercussions, as inflation has already risen to unprecedented levels.
The question that arises in everyone’s mind is whether it is possible to fill the gap that arises between production and supply – demand, in the face of prohibition. If so, how quickly and for how long can other countries provide an alternative to Russia’s crude oil? The question then arises.
European countries rely more on Russia for crude oil and natural gas than the United States. This question raises the question of whether the US announcement will create a rift between its foreign policy and its allies. This special article answers these questions and doubts.
Even before the Ukraine affair, there was a rise in crude oil prices. What are the reasons for this?
The last two years have seen fluctuations in crude oil. At the beginning of 2020, the price of a barrel of crude oil was US $ 60. The price of a barrel of crude oil fell to $ 20 in April 2020 due to lower demand due to corona infection and curfew. Crude oil prices, which have risen slightly since then, have risen further due to the crisis in Ukraine.
Crude oil demand is higher than global supply. Vikram S., head of the Center for Social and Economic Organization, says some issues in distribution are also contributing to the gap. Mehta.
Russia has stopped supplying natural gas in addition to Europe.
With the rise in natural gas prices, people are turning to coal and crude oil and its prices are starting to rise.
Due to public and regulatory hatred over non-renewable fuels, investments in oil and gas continue to be low.
You will not be given extra oil when you want.
And there is only limited spare capacity in the OPEC system. Only countries like Saudi Arabia and the United Arab Emirates have spare capacity. Yet they are thinking about how to work effectively in this
He listed the reasons for the rise in oil prices and the gap between supply and demand.
The US embargo comes into effect in an environment where the oil market is already in deep crisis.
What is Russia’s role in the world oil market?
Heath Ledger, director of Crisil Research, says the three largest countries in the world are rewriting the oil market. Globally, the United States holds 18 to 19% of the world’s oil. It is followed by Russia and Saudi Arabia with 12% each. The law is the same as in Saudi Arabia, with regard to the OPEC system. The total contribution of the three countries is 45% of the oil world. So Russia’s role is one of the most important.
Russia’s global exports are only 12%. It supplies nearly 5 million barrels of crude oil to the world market every day. This can not be considered a small amount of anything. Vikram said the announcement by the US and UK would immediately create a crisis in the market world.
Hettel agreed with him and talked about some of the more subtle problems involved. You need to consider how much they are importing and the nature of that crude oil, the cost of production and imports. For example, oil imported from Venezuela contains more pollutants than Russian oil. Hettel cited the need for more sophisticated refineries to clean it up.
The cost to a country of oil production also plays an important role. The United States, a new competitor in oil production, spends $ 40 a barrel on oil production. Russia and Saudi Arabia spend $ 20 and $ 15 a barrel on crude oil, respectively.
So Russia is the second largest country in the market but also the second largest supplier of low quality oil. Experts say such factors are driving oil prices to rise.
Will stocks help fill this gap?
These reserve strategies are most helpful only in times of emergency. Only the United States, China and Japan have large stocks of raw materials. In total, these countries have 1,500 million barrels of oil reserves for emergencies. With 95 million barrels used per day, Hettel says these will not last more than 20 days. And the question of whether China will come forward to help the nations of the world in this context is very obvious.
Is it possible to increase production and distribution in countries like Iran and Venezuela?
Venezuela has one of the highest crude oil reserves in the world. Requires more production than reserves. The country’s oil production has been severely affected by the state’s mismanagement and severe US sanctions. Oil plants are currently mired in debt. Hettel said they do not even have the best oil wells drilling machines. Mehta said Iran would not increase oil production without signing a nuclear deal with the United States.
Production can increase but it will take time, money and effort. Also, since individual production volumes are so low, many countries need to unite. But Heath Ledger said it would never come close to Russia’s current production.
Is there a difference between the US and its European allies in Russia’s energy imports?
There is a huge difference. That is why the answers of the United States, the United Kingdom and the European Union are different.
The United States relies on Russia for less than 10% of its oil demand. But European countries rely entirely on Russia for their oil needs.
Germany is not the only country with an industrialized economy. It is also an important decision-making body in the European Union. However, Germany remains Russia’s largest exporter of 12% of its oil. Germany relies on Russia for 40% of its total fuel needs. Germany also relies heavily on Russia for its natural gas needs. Unlike India, which relies on 75% coal, 10% crude oil and very little natural gas for its energy needs, Germany relies on more than 25% natural gas. That too is mostly imported from Russia.
The biggest challenge is to transfer the required fuels from one country to another. Although other countries have come to Germany’s rescue by supplying LNG (Liquid Natural Gas), there are no pipelines in Germany to supply it. To this day, Germany relies on natural gas pipelines from Russia. Hettel said it was not possible to build liquid gas terminals and pipelines in a single day.
In Tamil: Nithya Pandian
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