A crisis averted: Why the world can run without Russian oil

Russian oil, what
many believed fuelled much of the world, may not be as indispensable as Moscow
once believed. The Russian invasion of Ukraine saw the West rise in rage
against Putin’s Russia. Putin hoped that Europe’s dependence on Russian oil
would deter EU nations from taking stringent measures against Russia in the
long haul. Such hopes have now been dashed. The International Energy Agency
(IEA) said Thursday that the world will not be left short of oil even with
lower output from Russia.

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The IEA’s stance
is a reversal from its earlier position when it predicted a potential “global
supply shock” if Russian oil supplies diminish. On March 16, the energy agency
said three million barrels of oil supplies could be shut in from April owing to
the sanctions imposed on Moscow. In April, however, the decline was only one
million barrels per day.

A slowdown in
demand growth due to China’s stringent lockdowns has helped forestall a giant
deficit. “Over time, steadily rising volumes from Middle East OPEC+ and the US
along with a slowdown in demand growth is expected to fend off an acute supply
deficit amid a worsening Russian supply disruption,” the IEA said in its monthly
oil report.

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This has led the
Paris-based energy agency to revise its opinion on the economic impact of
further sanctions on Russia.

“Soaring pump
prices and slowing economic growth are expected to significantly curb the
demand recovery through the remainder of the year and into 2023,” the IEA said.
The energy agency added that China’s stringent restrictions to contain COVID-19
infection spread is driving an economic slowdown that has cut down on demand.

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Meanwhile, in a
bid to make up for a reduction in supplies, the United States and other IEA members
have pledged to release 240 billion barrels of oil by tapping into their emergency
storage for the second time. While the US has tried to address the crunch,
Russian oil exports returned to their January-February average as supply was
rerouted from Europe and the US to India.

Until last month
however, the European Union remained the top market for Russian oil exports.
The bloc now accounts for 43% of Russian oil exports, down from 53% then,
according to a Reuters report.