The oil market currently is experiencing a crisis that is beginning to reach the levels of the 1973 oil crisis, with barrel prices circulating above the 100 US dollar margin. The COVID-19 pandemic in correlation with the Russian invasion on Ukraine have both taken its toll on the oil market and the supply thereof. The world is now facing a new obstacle on the way to returning to normality and the way the governments and decision-makers react in the nearest future may indeed lead to the unfolding of the crisis or quite the opposite – a far worsened situation.
According to the CEO of Saudi Aramco, Amin Nasser, the “tragic situation unfolding in Ukraine” has contributed massively to the making of a global energy crisis, which already has been brewing with the gas prices skyrocketing already in 2021. With the decreased investment in refinery and the oil supply industry, the companies responsible deem it difficult to keep up with the demand and the spare capacity left is decreasing, meaning that oil becomes a far scarcer produce. With that in mind, the choice is either to continue with creating more green sources or aiding the industry that has suffered from lack of investment due to the changes in policies and/or consumer preferences.
The oil prices dropped massively at the beginning of the COVID-19 pandemic, with warehouses struggling to adjust to the levels of spare oil. Nonetheless, with the pandemic slowly becoming the new reality and the measures being loosened, the oil industry deems the policymakers and governments at fault with the reluctance of governments to restore the strict restrictions that plummeted the global economy when the pandemic started in 2020. Further, the Organization of Petroleum Exporting Countries (OPEC) began to slowly get rid of the output cuts that were implemented before and return to the ones pre-Pandemic. This, however, only relates to the larger companies and not to the small ones, resulting in many of them being simply incapable of raising the supplies, especially with the fear of possible new COVID-19 setbacks.
COVID-19 Pandemic most surely took its toll on the energy crisis unfolding, nonetheless the Russian invasion on Ukraine may indeed prove to be far more disruptive in the long run. Currently, Russia exports about 7.5 million barrels a day of oil and refined products, however with the current US and generally worldwide embargos and sanctions, the trade has become far more difficult. Moreover, it is undeniable that the consequences may lead to the Russian oil being omitted on the market and simply not be purchased, since JPMorgan estimated that currently about 66% of Russian oil does not find buyers. This, in turn, could lead to the price per barrel to skyrocket up to 180-190 US dollars by the end of the year if no answers are found. Daniel Yergin, vice-chairman of IHS Markit states that these embargos and the conflict itself and its consequences may steer the world into a crisis similar, if not worse, that the one endured in the 1970s. He notes that this will be a great disruption not only in terms of the prices and payments, but supply and logistics as well. In the near future, people may be forced to fight one another to be able to tank their cars.
With that in mind and the absolute no knowledge on what the consequences of the Russian invasion on Ukraine may be, the policy-makers and international organizations need to address this issue as quickly as possible. The EU, UN must react and cooperate within the frameworks of OPEC as well. Regardless of the long-term plans for a greener industry and energy, exemplified by the EU’s “Green deal”, several decisions need to be taken in order to tackle the ongoing crisis and to mitigate the prospect of a larger one than the one the world has already endured 50 years ago.
Reference list:
Oil rally to continue in 2022 as demand outstrips supply, analysts say. Accessed on 10th of March 2022. Available at:
Aramco CEO says Ukraine invasion has accelerated global energy crisis. Accessed on 10th of March 2022. Available at:
The world could be on the brink of an energy crisis rivaling the 1970s, says IHS Markit’s Yergin. Accessed on 10th of March 2022. Available at:
U.S. crude oil spikes to 13-year high of $130 overnight, then gives up most of that gain. Accessed on 10th of March 2022. Available at:
By The European Institute for International Law and International Relations.
