Russia’s invasion of Ukraine has triggered an unparalleled energy crisis, as seen by the quick rise in commodity prices. Besides that, Germany has suspended the approval of the Nord Stream 2 natural gas pipeline in response to sanctions imposed by European nations and the United States against Russia. As this crisis continues, concerns about how much Europe depends on Russia for its energy, mainly for natural gas but also for coal and oil, are increasing.
Russia's Gas Exports

How dependent is Europe on Russian gas?

Last year, over 40% of Europe’s natural gas came from Russia. Therefore, Germany was Europe’s leading natural gas importer in 2021, followed by Italy.

UK also imported about 4% of its natural gas needs from Russia last year and for the next three consecutive months. However, since June this year, the UK hasn’t imported any gas from Russia.

On the other hand, the United States does not import any gas from Russia.

However, they are still affected when Russia limits supplies to Europe’s mainland because this raises gas prices around the world.

Europe Considers Banning Russia's Gas Imports

Russian President Vladimir Putin has weaponized gas exports in order to put pressure on the Europe to ease sanctions related to the Ukraine conflict or to advance other political goals. Last month, Ukrainian President Volodymyr Zelenskyy referred to Russia’s reduction in gas shipments as “a form of terror” and encouraged European nations to respond by stepping up sanctions against Moscow.

Surprisingly, the brutality of Russia and the tenacity of Ukraine to uphold its democracy and sovereignty have changed the calculus of what trade-offs the United States and Europe are willing to accept in order to punish Russia. This means rising inflation and oil prices in a global economy that was already struggling before Russia’s attack.

Cutting off Russia’s energy exports is what harms Moscow. However, Russia is a significant oil exporter. There is a chance that there will be less oil on the market if the United States and Europe try to cut back on exports.

What would happen in the absence of Russian oil?

Before the war, Russia supplied 3.8 million barrels per day to Europe. Theoretically, European buyers might source oil from the United States, Latin America, and Africa in addition to Middle Eastern sources, whose current shipments primarily go to Asia. Meanwhile, less expensive Russian oil might replace the shipments from the Middle East to Asia.

However, it would take time for the world markets to adapt. According to Bruegel analysts, European countries should be prepared to enforce measures to cut fuel consumption, such as making public transportation free and promoting car-sharing. If those efforts are unsuccessful, more severe ones like license plate-based odd-even driving restrictions may be required.

Moreover, oil is a global commodity, and a net loss of supplies from Russia would result in higher oil prices for Europe and the rest of the world. It will also result in increased fuel prices for heating and transportation and rising consumer inflation.

Since Russia is a significant source of fuel for vehicles and farm machinery used in Europe, the price of this fuel has an impact on the price of a variety of foods and goods.

What Would Happen In The Global Oil Market After Russia's Oil Ban?

Due to shipping and logistical issues, all of Russia’s oil could not be transferred from Europe to Asia. It’s unclear how much consumers in nations like China and India would pay for Russian oil if it meant potential sanctions issues with the United States.

Global demand for oil was already high as economies recovered from the COVID-19 outbreak, and concerns about the war increased the tight market and high prices.