Ban on Russian oil: Western Europe sounds alarm

Ban on Russian oil: Western Europe sounds alarm

With the stricter embargo on Russian crude oil having come into force on Sunday, German experts forecast fuel shortages and skyrocketing prices. Meanwhile, it is becoming clear how the European Union is trying to be clever with Russian crude oil.

ECONOMY FEBRUARY 8. 2023 07:34

On Sunday, the strictest phase of the EU’s embargo on Russian oil, which includes diesel, heating oil and paraffin, went into effect. Some of the major powers in Europe, among others Germany, will be hit particularly hard by the third stage now in place.

“We are faced with the challenge of replacing around four million tonnes of diesel per year in Germany that have so far been imported from Russia,”

said Christian Kuchen, head of a lobbying association for the mineral oil industry. A look at the monthly oil report from the International Energy Agency (IEA) also shows how dependent the economies of the European Union are on Russian diesel deliveries. According to this, in December, the EU imported more than 700,000 barrels of diesel per day from Russia.

“After the decision on the oil embargo, the EU countries had eight months to become less dependent on diesel deliveries from Russia. But they didn’t do anything,”

Christian Fritsch, a commodities expert at Commerzbank, told the press, adding that the new stage of the oil embargo may leave a rather deep mark on the European market. In fact, the missing mineral oil products from Russia will have to be replaced by additional imports from 5 February, for example from Asia, the US or the Arab world. This will significantly increase transport routes, which will not only imply a larger ecological footprint, but will also entail transport price hikes. At the same time, the demand for tankers that transport diesel and heating oil to Europe will increase, leading to higher transport costs and tanker capacity shortages.

In other words, not only could a shortage develop on the market, but consumers could also face a significant price increase

the experts warn. Robert Rethfeld, market expert at Wellenreiter-Invest, also expects a palpable reaction to the oil embargo and pointed to another problem.

The oil embargo couldn’t have come at a worse time, as March and April are the start of the so-called “motoring season”. This period is usually accompanied by a strong increase in turnover, which is reflected in rising oil prices. Due to this seasonal effect, a rise in deisel prices is likely to be unavoidable,

Mr Rethfeld explained. Europe will certainly not escape the indirect effects if companies pass on the rising transport and production costs to the end consumers, for example in supermarkets.

Recently, however, it has come to light that Western Europe is only campaigning against Russian oil for public relations. The region, along with North America, remains heavily dependent on Russian oil, but because sanctions are preventing them from buying these raw materials directly from Russia, they are buying refined oil from India.

The crude oil will therefore remain of Russian origin and the purchase of refined products will not violate the sanctions, since it is true that the fuel is made from Russian oil, but the raw material is refined in India. So legally, Western Europe is buying Indian fuel.

India has increased its gasoline and diesel exports to New York to levels not seen in nearly four years, with an average of 89,000 barrels of fuel being shipped daily, Bloomberg points out. The daily flow of low sulphur diesel to Europe in January was 172,000 barrels.

The crude oil used to make the product sold was probably Russian, but this apparently did not bother either US or European officials.



eu, india, oil, russia, usa