The International Energy Agency (IEA) says the West’s crippling sanctions on Russia threaten the world with the biggest global oil supply shock in decades.
The Paris-based agency said on Wednesday that Russia, the world's second-largest crude oil exporter, would be soon forced to limit production by 30% under punitive measures imposed by the US and its Western allies in the wake of Moscow’s campaign in Ukraine.
On February 24, Russian President Vladimir Putin ordered “a special military operation” in Ukraine over concerns about NATO’s military activities close to Russian borders.
The IEA said in its monthly oil report that Russian oil production could fall by three million barrels per day from April and could worsen if “restrictions or public condemnation escalate.”
“The prospect of large-scale disruptions to Russian oil production is threatening to create a global oil supply shock,” the agency warned. “Faced with what could turn into the biggest supply crisis in decades, global energy markets are at a crossroads,” the IEA said. The firm also stated that “the crisis may result in lasting changes to energy markets.”
“The implications of a potential loss of Russian oil exports to global markets cannot be understated.”
The United States, Britain, Canada, and Australia have banned imports of Russian oil. The move has sent oil prices soaring. It affects roughly 13% of Russia’s exports, but, according to the IEA, major oil companies, trading houses, shipping firms and banks have “backed away from doing business with the country.”
Moves by major oil companies and global banks to stop dealing with Moscow are forcing Russia to offer its crude at a huge discount.
Russia is the third-largest oil producer after the US and Saudi Arabia. But the country is the largest oil and products exporter in the world. Europe depends on Russia for about 40% of its natural gas.
Germany warned on Tuesday that an immediate boycott of Russian gas and oil supplies could bring mass unemployment and poverty to the EU member state. “If we flip a switch immediately, there will be supply shortages, even supply stops in Germany,” said the economy and energy minister, Robert Habeck.
Brent crude leaped above $139 per barrel over a week ago. Analysts at the Bank of America warned that prices could touch $185, then $200, if most of Russia’s exports were cut off.