oil will be lost to the world market, particularly in the short-term – from as little as 0.25 mb/d by Opec to 3 mb/d by Goldman Sachs.


WHAT NEXT After months of negotiations, the EU announced on June 3 an import ban on all Russian seaborne crude oil and petroleum products – effective in six months for crude oil and eight months for petroleum. Both Germany and Poland have also committed to halting pipeline imports, so 90% of Russian oil exports to the EU or 2.5 mb/d are going to be lost.


Again, however, a significant proportion will be captured by other buyers. In May, for instance, China’s oil imports from Russia reached a record of 2 mb/d, and Russia overtook Saudi Arabia as China’s largest supplier. India has also boosted its purchases of Russian oil since the war started. China and India are the world’s two largest net oil importers, and China is the second largest oil consumer after the US.


In total, the US Energy Information Administration (EIA) assumes that about 80% of the crude oil subject to the EU import ban will find alternative buyers, mainly in Asia. As long as sanctions are not imposed by all the major oil importers, Russian oil will continue to find buyers.


This explains the considerable variation in estimates of how much Russian


In the longer term, however, assuming the western boycott is maintained and even tightened, the loss will become more notable. Even before the war, the Russian government’s own forecasts expected its oil and gas production to be undermined both by depleting reserves and the effects of the technological and economic sanctions imposed by the west after the 2014 Crimea invasion. Even its most optimistic scenario predicted a short- term modest increase in oil production and then plateauing from 2024 to 2035. In the more conservative scenario, oil production was expected to decline.


Since the war began, many western oil companies, which typically bring capital and technology, have exited Russia. In a country with complex reservoirs, ageing fields and a hostile climate, the lack of investment and access to technology will accelerate the long-term decline.


The global market will ultimately accommodate such an outcome, as other supplies become available and demand responds to prices, but Russia will have to live with a shrinking market share and diminished influence on global oil markets. This will make it much harder for Moscow to finance future wars. It also means that the Russians are going to have to diversify their economy at a time when a substantial slice of the world will no longer do business with them.


Dr Carol Nakhle CEO Crystol Energy


13 | ADMISI - The Ghost In The Machine | Q2 Edition 2022


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24