The West’s self-inflicted oil and gas supply constraints (sanctions on Russian oil and gas) has and will continue to raise the price the West must pay for oil and gas. It’s that simple. From Tyler Durden at zerohedge.com:
Europe’s extreme dependency on Russian energy products from oil to natural gas is made clear recently from the manner in which they have approached sanctions – with incrementalism, slowly sinking back into the bushes.
The latest agreement among member nations on export bans targeting Russia is largely oil focused, not natural gas focused, with the union demanding an immediate 70% decrease in Russian oil transferred BY SHIP. Oil transferred by pipeline will continue to flow into the EU for now. The ban is intended to expand to 90% of all shipborne Russian oil by the end of this year. Natural gas imports from Russia will also continue.
While some European nations are more dependent on Russian energy than others, overall 40% of the EU’s needs are supplied by the country’s industry. It is not surprising that they are seeking an incremental approach to sanctions, they simply would not be able to survive another winter if they were to go cold turkey and block Russian imports completely. Of course, this does not mean that Russia has to operate on Europe’s timetable.
Russia is already reducing exports of natural gas to multiple EU countries, with Denmark, Netherlands and Germany being the latest to see losses. The EU’s ban was oil and ship focused because they cannot find an alternative source for natural gas that would resolve shortages if they banned everything. Germany in particular would be destroyed by the loss of natural gas supplies from Russia with its 42% dependency.