Jun 3, 2022 3 min read Business

World Energy Crisis Looms After Russian Invasion

Russia's invasion of Ukraine has upset an already fragile energy sector that could send the world into crisis.

Russia’s attack on Ukraine is redrawing the world’s energy map, ushering in a new era in which the flow of fossil fuels is influenced by geopolitical rivalries as much as supply and demand, writes The Wall Street Journal.

Over the past half-century, oil and natural gas have moved with relative freedom to the markets where they commanded the highest prices around the world. That ended abruptly when Russian tanks rumbled across the Ukraine border on Feb. 24, triggering a barrage of trade sanctions by the U.S. and Europe targeting Russia that have plunged global commerce into disarray.

The End of Energy Free Trade (The Wall Street Journal)

Excerpt from The Wall Street Journal: This week, the European Union agreed to its toughest sanctions yet on Russia, banning imports of its oil and blocking insurers from covering its cargoes of crude. Whatever new order emerges won’t be fully clear for years to come. But traders, diplomats and other experts in energy geopolitics generally agree that it will be more Balkanized, and less free-flowing, than what the world has seen since the end of the Cold War. "We are in a real hinge of history," said Chas Freeman, a former U.S. ambassador to Saudi Arabia.

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The world is grappling with gravity-defying energy price spikes on everything from gasoline and natural gas to coal. Some fear this may just be the beginning. Current and former energy officials tell CNN they worry that Russia's invasion of Ukraine in the wake of years of underinvestment in the energy sector have sent the world careening into a crisis that will rival or even exceed the oil crises of the 1970s and early 1980s, reports CNN Business.

The world may be careening toward a 1970s-style energy crisis -- or worse (CNN Business)

Excerpt from CNN Business: Unlike those infamous episodes, this one is not contained to oil. "Now we have an oil crisis, a gas crisis and an electricity crisis at the same time," Fatih Birol, head of the International Energy Agency watchdog group, said. "This energy crisis is much bigger than the oil crises of the 1970s and 1980s. And it will probably last longer." The global economy has largely been able to withstand surging energy prices so far. But prices could continue to rise to unsustainable levels as Europe attempts to wean itself off Russian oil and, potentially, gas. Supply shortages could lead to some difficult choices in Europe, including rationing.

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The New York Times writes that the European Union’s embargo on most Russian oil imports could deliver a fresh jolt to the world economy, propelling a realignment of global energy trading that leaves Russia economically weaker, gives China and India bargaining power and enriches producers like Saudi Arabia.

Europe, the United States and much of the rest of the world could suffer because oil prices, which have been marching higher for months, could climb further as Europe buys energy from more distant suppliers.

Europe’s Russian Oil Ban Could Overhaul Global Energy Market (The New York Times)

Excerpt from The New York Times: European companies will have to scour the world for the grades of oil that their refineries can process as easily as Russian oil. There could even be sporadic shortages of certain fuels like diesel, which is crucial for trucks and agricultural equipment. Europe’s hunt for new oil supplies — and Russia’s quest to find new buyers of its oil — will leave no part of the world untouched, energy experts said. But figuring out the impact on each country or business is difficult because leaders, energy executives and traders will respond in varying ways.

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