Although Russia prohibits the export of gasoline, diesel and heating oil to countries with price ceilings for Russian petroleum products, it will still end up in the West via a roundabout route. Energy expert Aad Correljé of TU Delft predicts price increases and shifting fuel flows. “Russia doesn’t know what happens to the crude oil it sells to other countries.”
Initially, the Russian export ban will lead to a shift in oil flows. In the West, gasoline, which we still import from Russia, will disappear and will have to come from elsewhere. On the other hand, Russia will start supplying countries other than European countries. However, Russian oil products will eventually find their way to the West in a roundabout way.
‘Russia will obviously continue to produce, even if less than in the past. And this leads to market pollution, which has to do with transportation, storage, contacts and contracts. This change will not work smoothly and could have an impact on prices.’
Price increases
Oil companies are already anticipating price hikes and we are noticing this at the pump where we are already paying more for diesel and petrol. Although Correljé calls it a “reflection of this change,” how prices will develop and what these changes in fuel flows will ultimately look like depends on many factors. ‘You have the effect of the economy, economic activities, ultimately also the weather. All these factors lead to uncertainty in the market and the habit of new supply models.’
the logistics
Correljé also underlines the importance of logistics: where are the tankers available? (Many tankers on the world market are not available for Russian oil because they cannot be insured due to Western sanctions, ed.). Where is the storage? “That model results in an increase in price, maybe even a decrease if at some point it turns out that things are going to be better than expected.”
With their export ban, the Russians are also cutting their own flesh: they need new markets, and in the resulting buyers’ market, the customer is king. “The prices at which the Russians are selling oil are significantly lower than world market prices and past prices. Those countries that buy are at an advantage.’
Little effect
Nor does a Russian export ban have any real effect: oil can simply flow to the West in a roundabout way. It is impossible for the Russians to control what happens to their crude oil once it has been exported and processed in Chinese or Indian refineries. Also, crude oil is blended with crude oil from other countries in many refineries. “It therefore becomes very difficult to determine whether it is Russian diesel or petrol.”
‘The resulting products are then sold on the world market, where a somewhat vague picture emerges. In that sense, it is also quite difficult to consistently enforce such a one-on-one boycott, just as Russia does not know from the Russian point of view what happens to the oil it sells to other countries. And that it is still being sold to countries that want to deprive themselves of oil.’
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Source: BNR
Sharon Rock is an author and journalist who writes for 24 News Globe. She has a passion for learning about different cultures and understanding the complexities of the world. With a talent for explaining complex global issues in an accessible and engaging way, Sharon has become a respected voice in the field of world news journalism.
