Will Europe's ban on Russian oil increase global fuel prices?

The European Union's ban goes into effect on 5 February and comes after the embargo on coal and most oil products from Russia. The 27-nation European bloc is trying to cut off any Russian energy use and thus create no opportunity for Russia to finance its aggression in Ukraine.

The newest ban has risks: Oil prices have increased since the start of the war in Ukraine on February 24th, and they can regrow for fuel that plays a key role for the global economy.

“We are spending a lot of money to be able to offer our services”, said Hans-Dieter Sedelmeier from the German bus and travel company “Rast Resen”.

Most of the things people buy or eat are transported at one point by trucks, which are mostly oil - efficient. It also enables the functioning of farm equipment, city buses and industrial equipment. The scope of oil affects almost everything, affecting the rise in inflation that has made life more difficult for people worldwide.

Next, we offer the key facts about the future European embargo:

A EARTH ENVIRONMENT NAFTA FOR CARDURANT?

Oil is sold globally, and Europe may seek new resources, such as in the US, India, or countries in the Middle East. If this goes smoothly, the impact on prices can be temporary and modest.

Europe has already almost halved Russian oil imports from 50% of total pre-war imports to 27%. American suppliers have increased remittances to record levels, from 34,000 barrels a day at the beginning of 2022 to 237,000 barrels a day so far, according to “S&P Global”.

The EU's top energy official, Kadri Simson, says markets have had time to adjust after the ban was announced in June. Europeans also appear to have reserved Russian oil before the deadline, with imports growing last month.

There is a complicating factor: The group of seven major democratic countries is discussing setting a ceiling price for Russian (dizel) oil that goes to third places, as they did for Russian crude oil. As with crude oil, the idea is to create an opportunity for the Russian diesel to continue trading on world markets, but reduce the revenues Moscow benefits.

If the ceiling price functions as expected, global oil flows must be re-organized, with Europe having to find new suppliers and Russian oil to find new customers without a major supply loss.

But it is difficult to say how the ceiling price will work without knowing where the price will be put and whether Russia will retaliate by stopping remittances.

“When Russian exports are limited, for whatever reason, this would surely cause some trouble in this reorganization process” said Hedi Grati, head of fuel research and refining for Europe in “S&P Global Commodity Insights”

“Europe would compete with other large importers, and this would cause increased pressure on the” prices.

If the ceiling price does not block large amounts of Russian oil, there may be “a short-lived price hike of” while the market adapts. First, the tankers would have a longer journey to Europe from the US, the Middle East, or India, than from the Russian ports of the Baltic Sea, stressing transport capacity.

But the new massive refining capacities will start working in Kuwait and Saudi Arabia this year as another in Oman starts work in 2024. This “could further ease any pressure from this divorce point from Russia”, Mr. Grati said.

WHAT AFFECT AFFECT IT WAS A TAVAN CHIM?

Hope is to repeat the effect that was achieved through the introduction of the ceiling price of crude oil, which banned Western companies that control mainly shipping services to treat Russian crude oil at a price of over $60 per barrel.

Russia says it will not sell oil to countries that respect the ceiling price, but this price of the ceiling and drop demand from a slow global economy has led customers in China, India and elsewhere to buy Russian oil at large discounts, lowering the Kremlin's income.

Driven by more expensive crude oil, oil prices rose to over $1,000 per ton last week from 800 dollars per tonne as it was in early December.

Another reason for the price increase was a storm at the end of December in the US that cut off the refinerys, said Barbara Lambrecht, an analyst at “Commerzbank”.

WHAT IN HISTORY IF BENSIN BOY DO YOU regret it?

Fuel prices have been a major factor of painful inflation in Europe, which has seized consumers' purchasing power and slowed the economy.

Oil prices in the market have fluctuated from 1.66 euros per litre (6.43 dollars per gallons) to $2.14 euros per litre (8.29 euros per gallons) over a year.

“This is a giant increase,” says Christopher Schuldes, the third generation family to run the German truck company Schuldes Speed.

The company has 27 oil trucks and 50 employees in the small town of Alsbach-Haehnley between Frankfurt and Heidelberg in southwestern Germany. It has already lowered fuel costs by equipping trucks with efficient engines, ensuring that trucks leave fully loaded and training employees in efficient fuel management.

We did all of this long ago, long before Russia attacked Ukraine,” said Mr. Schuldes. “There is no room for optimization”.

To ease additional oil costs, the company tried to negotiate higher prices with customers who have long-term contracts. Some agreed, some did not. Even if a contract allows prices to rise at oil costs, there is a two-month delay in changing the price.

Regarding the embargo, “I am puzzled” said Mr. Schuldes. I need to see that the company is in good shape and that our purchases are as economical as possible. On the other hand, I say that Russia should not be supported”.

Meanwhile, Rast Reisen, the bus and travel company near Freiburg, my Breisgaut in southwestern Germany, has seen rising diesel fuel from 12% to 20%-25%. Because 15 of its 25 buses are part of the regional public transport network, the company cannot automatically raise the government's tariffs and increases so far are <x0.9 points on a hot stone”, said Mr. Sedelmeier, director of public transportation.

The Rast Reisen Company had to make an additional $10 to 15 euros ($1 to 16th) for travel to destinations known as the Northern German island of Sylt or on Croatia's coast, because prices rose after printing catalogs. Next year, prices for such trips will simply be higher.

WHAT CAN THE BAD SAY?

Energy markets are looking to China to see when the second largest economy in the world will be restored after COVID-19 is completed. With low demand for fuel in the country, the Chinese government allowed refinerys to increase their exports.

But if trips start in China, that oil could disappear from the world market, raising prices as fuel competition increases. / VOA