Despite excessive reliance on Russian oil, supplies to most European countries have been affected.
Despite excessive reliance on Russian oil, supplies to most European countries have been affected.
In the seven months since Russia’s invasion of Ukraine, the tables have turned. Initially, major financial and commercial sanctions were imposed on Russia by the US, UK, EU and other countries. This had an impact on the ruble, which was trading at 81 per dollar before the attack and fell to 151 by March. Although, ruble recovered In the following months, and by May, it went back to pre-invasion levels.
In the months following the invasion, strict sanctions against Russian oil and gas remained a contentious topic for countries in the European region. This was because before the war a quarter of the region’s oil needs were met by Russia. After much deliberation, the 27-nation bloc decided to cut off Russian oil coming from the ship from 5 December. Russia has sharply reduced its oil exports to the European region and plans to reduce it further as the US and other countries move forward. With a price range on its oil.
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The data shows a combination of supply-squeezing from Russia and self-imposed import restrictions has led to a sudden jump in Europe’s energy prices. inflation in the european region Since the Ukrainian invasion grew uncontrollably. chart 1 Shows month-wise inflation rates in the EU since 2010 across different regions.
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Energy-related inflation began to rise after the war and has exceeded 40% in recent months. While overall inflation and food-related inflation have reached 10-year highs in recent times, their growth has been modest in comparison to the rise in energy prices.
The effects of rising energy costs were felt in all European countries. chart 2 Shows energy-related inflation rates in select European countries. In the UK, energy inflation crossed the 70% mark, and in Spain, it crossed the 60% mark, while in the Netherlands it touched almost 100%. In all the countries analyzed, energy-related inflation levels have reached at least 10-year peaks.
Such a steep increase in inflation levels in Europe is understandable given the high level of dependence on Russian oil. chart 3 Reflects the share of Russian oil imports in the country’s total domestic oil consumption. The data provided is the average between 2014 and 2019. For example, oil supply from Russia accounts for 38% of Germany’s domestic oil demand. Countries such as Belgium, Finland and the Netherlands also depended heavily on Russia for their oil needs.
In some countries, this figure exceeds 100% because a nation can import more fuel than it consumes in a year. Some may stock, re-export, or convert it into other petroleum products and export them.
Despite such high dependence, after the invasion of Ukraine, oil supplies from Russia to most European countries have been affected. Table 4 Reflects the share of Russia in the country’s total oil imports. The data is provided for two periods – February 2021 to June 2021, and February 2022 to June 2022. For example, Russia constituted 60-75% of Finland’s total oil imports in 2021. However, it came down to 10-30% in April- June 2022.
A similar decreasing trend was seen in the UK. Before the invasion, Russia made up 15–20% of the UK’s total oil imports. However, it declined to 2-5% between April and June 2022.
The US and a group of seven major democracies are working out details on price limits on Russian oil and the European Union this week approved a measure along those lines that could remove more Russian oil from the market, raising prices. can push even more.
(with inputs from AP)
Source: Euro Area Statistics, International Energy Agency
nihalani.j@thehindu.co.in vignesh.r@thehindu.co.in
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