about 1 year ago • 2 mins
New restrictions on Russian oil came into effect on Monday, setting the stage for one of the biggest shake ups in global oil markets for decades.
What does this mean?
Western sanctions just got beefier: the European Union (EU) barred all seaborne imports of Russia’s slippery elixir, while countries in the G7 announced a price cap designed to squeeze the country’s oil-based revenues. Unsurprisingly, Russia wasn’t a fan of that new price-cap proposal, and has already made clear that it won’t be doing business with any nation insisting on those lower prices. In fact, the country’s determined to keep its oil flowing come hell or high water: Russia bought more than 100 ships this year, as the foreign tankers it formerly relied on will now be refusing to touch the country’s black gold. But that might not be enough to plug the gap, and traders predict that Russia could be hard-pressed to keep exports steady going forward.
Why should I care?
For markets: Unfortunately, inflation.
Just how much Russia’s exports drop could determine whether prices rise or fall in 2023 – not good news for countries hoping they’d seen the end of inflation-riddled times. So sure, OPEC+, a group of oil producing nations, announced over the weekend that it was prepared to take “immediate” action to stabilize markets – but at the end of the day, high prices work in the group’s favor. And with global demand slackening, analysts reckon the group could even end up cutting production to stop prices dropping.
The bigger picture: Close but no cigar.
Europe’s been doing its best to become less reliant on Russian energy: data out on Monday showed that the EU cut gas demand by nearly a quarter in November versus the five-year average, even as the weather turned colder. But it seems the bloc may need to go to even further lengths, with industry experts warning that the region could face gas shortages for years to come.
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