1 week ago. Paris, France

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

Russia is the biggest exporter of oil in the world
Much of Europe depends on Russia for its oil
The Russia-Ukraine war has led to sanctions on Moscow

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.

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

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