The war between Russia and Ukraine has dramatically changed the dynamics of global politics, from economic supply chains to geopolitical competition between great powers at all levels. After the war broke out on February 24, 2022, Western countries, especially the United States and the European Union, imposed heavy economic sanctions on Russia as punishment for the war. Over time, the sanctions have been escalated to a serious degree, resulting in undermining and hindering Russia’s economic stability and also having knock-on effects on economic resilience around the world.
In contrast, Vladimir Putin played a clever card game against the West with oil and gas trump cards. Notably, Russia is a major exporter of crude oil and refined oil products such as gasoline and diesel, exporting about 5 million barrels of crude oil per day and her 3 million barrels of petroleum products. These export volumes represent about 40% of Russia’s total revenue. In addition, Russia is also an important member of her OPEC Plus, the largest oil producer and exporter in the world oil market. In this regard, oil politics led by the West, Russia and OPEC+ is he one of the major conundrums that have created energy problems around the world.
In this regard, the trajectory of Saudi Arabia’s oil policy during the Ukraine war also presents a very interesting development. Once seen as one of the core allies of the US and the West, Saudi Arabia, the leader of OPEC+, has shown no sympathy for increasing oil production to meet their high needs. The country now largely follows self-interest outside the US canopy of influence, and cares nothing about the consequences. Among the top three oil producers, according to her EIA estimates for 2021, Saudi Arabia produces 10.8 million barrels of oil per day, putting her in second place behind the United States. I have.
With such massive oil production, Saudi hostility to US demands is of great concern to the West. Moreover, with winter knocking on Europe’s doors, European countries may become more vulnerable to high demand for oil and gas. In contrast, the EU’s recently adopted $60 price cap on Russian oil could also create headwinds for Russian policymaking and impact countries. oil and gas.
Oil Blocks and Producing Countries: Contribution and Significance
Before considering a detailed explanation, let’s take a glimpse of the diverse importance and contribution of oil blocks to the global energy market. According to an estimate for 2021, total global oil production will be 89.9 million bpd, with Middle East countries topping the list by region for estimated oil production. The region produces 28.1 million bpd, while among the high producing regions North America produces 23.9 million bpd, Asia Pacific 7.3 million bpd and Africa 7.2 million bpd. In this respect, the contributions of South America and Europe are also very important, with the Latin American region producing 5.9 million bpd and Europe her 3.4 million bpd. From an organizational perspective, OPEC accounts for the largest share of oil production, estimated at 31.7 million bpd, or about 35% of total oil production worldwide. Similarly, the Commonwealth of Independent States (CIS) estimated oil production is about 13.8 million bpd.
Regarding Russian oil production in particular, Russia, the world’s third largest oil producer after the United States and Saudi Arabia, currently produces about 11.3 million barrels of oil per day, which is the world’s total oil production. It accounts for more than 12% of production volume. Such significant contributions and market incentives make Europe highly dependent on Russian energy. Russia accounts for about 40% of the EU countries’ oil and natural gas consumption. However, five of the top 10 oil producers are in the Middle East region and her OPEC countries, which account for 27% of total global oil production. Furthermore, according to the Observatory of Economic Complexity (OEC-2020), Saudi Arabia is the world’s largest crude oil exporter, earning approximately $95.7 billion from crude oil exports. In this regard, the United States and Canada earned $52.3 billion and $47.2 billion respectively in 2020, making them the second-largest suppliers and important members of OPEC+, while Russia cuts her $74.4 billion from global energy markets. earned a dollar Europe is therefore undeniably dependent on Middle East and Russian energy, so managing the dynamics of oil politics is now more complex after the Russian oil ban was implemented and Saudi Arabia began to catch up with adversity. It is
Recent Russian oil caps and their purpose
Most recently, a significant ban on Russian oil by the EU came into effect on 5 December through the approval of the G7 (G7) and Australia a price cap of $60 per barrel for Russian petroleum products and offshore oil. While most non-EU Western countries had imposed sanctions on Russia’s energy sector since March this year, the European Union has had nearly six months to discuss conflicting issues regarding the oil ban. It took. The Ukrainian president has long criticized Europe for not taking concrete decisions to undermine the Russian economy. But the latest ban is the first faction of several bans, with Russian oil banned first at the beginning of the month, followed by petroleum products in February 2023. It has been addressed as a safety valve against the serious consequences of banning Russian oil on world markets, with his three main objectives of controlling oil price volatility. It ensures a perfect supply of Russian petroleum products outside the EU market to meet the needs of developing countries and, importantly, interferes with Russia’s revenues from energy sales. However, Russia rejected a $60 oil price cap and warned the West against a serious response.
Who gains and who loses?
The $60 price cap was allegedly introduced as a “safety valve” against the dramatic consequences of banning Russian oil on the world market, but it was a political threat aimed at sabotaging Russian revenue-earning. It is clear that there is no other way. Russia from energy sales. Volodymyr Zelensky argued that this price cap was very comfortable for Russia and would be lowered further.However, Russia sincerely rejects price caps, and there are several reasons behind this antipathy. Russia does not appear to suffer significant losses in monthly revenues due to the “comfort” price cap, but Russia will endure significant losses in total revenues. For several days, Russia has shipped about 1.7 million bpd to Europe. Interestingly, it will be very difficult for Moscow to replace this huge oil market elsewhere.
In this regard, Russia had no other room to consider a sale outside the EU and had to comply with a tough decision for Russia to sell. We are losing 1.5 million barrels of oil per day to logistical points due to the lack of adequate ships and pipelines. As a result, Russia will lose volumes, although it is currently receiving prices. Moreover, the geopolitical dynamics are also getting denser in this respect. OPEC has yet to issue a statement, but the Saudi-led OPEC decision to increase oil production to make up for the 1.5 million barrel shortfall of Russian oil on global markets is another key element in oil politics. would be If OPEC doesn’t ramp up production, Brent’s determined oil price should be as high as $100 a barrel. Such a price would allow Russia to make more profit than the current ceiling price, even at a discount. In contrast, it would still lose in terms of export volumes, and this politics has been skillfully deployed by the West to discourage Russia from investing in war.
What is the future trajectory?
A highly divisive outlook that future imprints of oil politics between the US, EU, OPEC and Russian parties could further the energy crisis to a significant degree with developing countries becoming scapegoats of consequences suggests. However, while European countries will continue to put pressure on OPEC to expand oil production, it is unlikely that Saudi Arabia will follow suit. Alternatively, Western countries are looking to import more oil from West Asian and West African countries to meet extreme needs, but there are some problems with pipelines and transportation.Texas Oil Production in the United States could be another alternative to European demand, but the question is whether the US will ramp up production. But Europe is now embroiled in two problems. First, her Saudi-led OPEC has been reluctant to increase production, forcing it to continue to buy Russian oil at a fair price; It is to permeate a fragile situation in which Russia enjoys the advantages of its resources. Similarly, Russia, which still has large markets in China, India and Turkey, will also experience a delicate oil policy led by Europe and the G-7. Let’s get developing countries out of their misery.