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Ukraine conflict: How reliant is Europe on Russia for oil and gas? Ukraine conflict: How reliant is the world on Russia for oil and gas?
(5 days later)
Russian gas flows through pipelines across eastern and central Europe Ukraine has called for sanctions to be expanded to include a ban on Russian oil exports.
European gas prices have risen after the approval of the Nord Stream 2 pipeline to Germany was halted because of Russia's invasion of Ukraine. But if an oil ban were to go ahead, Russia has warned it could cut off gas supplies to other countries.
The price of oil has also increased sharply since the war began. Could there be sanctions on Russian oil and gas?
With a quarter of the European Union's oil imports coming from Russia, along with almost half of its gas, there are concerns that Russia could restrict supplies in retaliation for measures taken against it. The West has imposed a series of economic sanctions on Russia following the invasion of Ukraine, but is yet to target oil or gas.
How much gas does Europe get from Russia? US Secretary of State Antony Blinken has said there are "very active discussions" about how to ban oil imports from Russia, while at the same time "maintaining a steady global supply".
Russia supplies about 40% of the EU’s natural gas imports. Most of the rest comes from Norway and Algeria. However, Deputy Russian Prime Minister Alexander Novak said rejecting Russian oil would lead to "catastrophic consequences for the global market", and that Russia might close its main gas pipeline to Germany if a ban went ahead.
Russia sends gas to Europe through several main pipelines - such as Nord Stream 1, Yamal-Europe and Brotherhood. Germany is especially reliant on Russian gas, so it is vulnerable to any restrictions on supply.
The gas is collected in regional storage hubs, and then distributed across the continent.
Germany's decision to withhold approval for Nord Stream 2 has led Russian warnings that the price for gas in Europe will rise dramatically.
The Nord Stream 2 pipeline and the Ukraine crisisThe Nord Stream 2 pipeline and the Ukraine crisis
IEA: Green energy needed to avoid turbulent pricesIEA: Green energy needed to avoid turbulent prices
German Chancellor Olaf Scholz has issued an order to halt the process of certifying the Nord Stream 2 gas pipeline. Well. Welcome to the brave new world where Europeans are very soon going to pay €2.000 for 1.000 cubic meters of natural gas! How much oil does Russia export?
Gas prices in the European Union have already risen by more than 70% since 21 February 2022. Gas and oil prices have already risen sharply and would rise yet further if Russia halted exports.
Russia only provides about 5% of the UK's gas supplies, so it's less reliant on Russian imports than other European countries. Russia is the third biggest producer of oil in the world, behind the US and Saudi Arabia.
But prices in the UK are also up significantly due to the knock-on effect of supply shortages elsewhere in Europe. Of about five million barrels of crude oil it exports each day, more than half of that goes to Europe.
Overall, Russian gas exports to Europe have been decreasing over the last couple of years - down 32% in February this year compared with February 2020. The US is less reliant, with about 3% of its imported oil coming from Russia in 2020.
What would happen if Russian gas stopped flowing into Western Europe?
Heating prices - which are already high - would increase even more.
Russian gas accounts for about 40% of the EU's natural gas imports.
If this dried up, Italy and Germany would be especially vulnerable.
Russia only provides about 5% of the UK's gas supplies, and the US doesn't import any Russian gas.
However, prices in the UK and US are still up significantly due to the knock-on effect of supply shortages.
Could alternatives to Russian gas be found?
Not very easily.
"It's harder to substitute gas because we have these big pipes that are taking Russian gas to Europe," says Ben McWilliams, an energy policy research analyst.
The think tank Bruegel predicts that if Russia were to stop gas supplies to Europe, then Europe could possibly import more liquefied natural gas (LNG) from the US.
It could also ramp up the use of other energy sources, but doing so is not quick or easy.
"Renewables take time to roll out so in the short term this is not a solution," says research analyst Simone Tagliapietra.
"So for next winter - what can make a difference is fuel switching such as opening up coal-fired power plants, as Italy and Germany have plans to do in case of an emergency."
Russian gas flows through pipelines across eastern and central Europe
EU leaders are set to unveil a plan on Tuesday to reduce their dependency on Russian gas.
What about oil?What about oil?
Russia is the European Union's biggest oil trading partner, according to the latest data from Eurostat. Ben McWilliams says, "On oil, it should be easier [to find alternative sources], as it's not so many pipelines, There are some coming from Russia but there's also a lot of shipments from elsewhere."
The UK is less reliant on Russia for oil, getting most of its imports from Norway and the US. The US has been asking Saudi Arabia to increase its oil production, but it has rebuffed previous US requests to boost output in order to reduce oil prices.
There has been speculation that European countries would cut oil supplies from Russia in response to the invasion, which would drive up prices further. Saudi Arabia is the biggest producer in Opec, the oil cartel which accounts for about 60% of the crude oil traded internationally. Because of this Opec has a key role in influencing oil prices.
More expensive oil means higher petrol prices, as well as increased manufacturing costs leading to higher prices for many other goods. Nord Stream 2 has now been halted - it would have doubled gas exports to Germany
Oil prices have soared to more than $100 per barrel for the first time since 2014. Russia is not in Opec but has been working with it since 2017 to place limits on oil production, in order to maintain earnings for producers.
What's happened to gas stocks in Europe? The US is also looking at relaxing Venezuela's oil sanctions. It used to be a key US oil supplier, but recently Venezuela has largely been selling its oil to China.
Gas storage across Europe is well below the 10-year average, with levels currently just below 30% of storage capacity, according to Gas Infrastructure Europe data. Europe could turn to existing gas exporters such Qatar - or Algeria and Nigeria, but there are practical obstacles to quickly expanding production.
However, storage is normally lower at this time of year, before being increased during the spring and summer months. What could happen to my heating and fuel bills?
The UK's gas storage is currently about 86% full but it has much less storage capacity than most of European countries. Consumers will face rising energy and fuel bills as a result of this war.
One factor - during the pandemic - has been falling demand as economic activity shrank. In the UK, household energy bills have been kept in check by an energy price cap.
As a result stocks of gas across Europe have been depleted, which in turn is driving up prices. But bills will rise by £700 to about £2,000 in April when the cap is increased. They are expected to reach about £3,000 when the cap is increased again this autumn.
There are several other factors which have affected the situation in Europe, such as cold weather depleting stocks and growing demand for gas elsewhere in the world. UK petrol and diesel prices have also soared and petrol is expected to reach 175p a litre as the war continues.
Europe is competing for global gas supplies In the US, petrol costs have reached their highest levels since 2008, with the American Automobile Association saying that pump prices had jumped by 11% over the past week.
The economic rebound in the wake of the coronavirus pandemic has caused factories to ramp up production, pushing up demand for energy. "I think if we're in a world where Russian oil and gas stop flowing to Europe then we're going to need rationing-style measures," says McWilliams.
Europe is also facing increased competition for gas from other parts of the world. "Part of the conversation now is, can we tell households to turn their thermostats down one degree, which can save a significant chunk of gas."
In recent decades, demand for gas in some regions like Asia and the Middle East has risen sharply.
This has knock-on effects on the market for liquefied natural gas (LNG), which makes up about a quarter of Europe's imports.
When demand for LNG is high, supplies tend to be diverted to Asia to take advantage of rising prices.
In addition, Russia has been expanding its gas exports to China, and in June inaugurated a gas processing plant in the far east of the country, which is predicted to become one of the biggest in the world.
Could Europe cope without Russian gas?
The EU relies on imports to meet 61% of its energy needs and 40% of its natural gas comes from Russia.
Analysis by the think tank Bruegel predicts that if Russia were to cut off supplies to Europe completely, the amount of gas held in storage in EU countries would fall to the lowest level for at least a decade by April.
April is the time when temperatures rise and European countries usually start increasing the amount of gas they have in storage to prepare for the following winter. That would mean that they would need to find other sources of gas.
That could mean countries increasing the amount of their own gas that they extract and also importing more liquid natural gas (LNG) from places such as North Africa and Azerbaijan.
The enormous amount of extra gas needed would put considerable pressure on the European gas sector and increase gas prices from their already high levels.
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