Europe’s energy divorce from Russia has been swift.
Since the European Union banned purchasing seaborne Russian crude oil in December, Russia’s exports have fallen by 9%. That’s a big drop, mitigated only somewhat by increased exports to Asian countries not party to the ban.
The G7 countries and Australia, meanwhile, capped the price of Russian oil at $60 a barrel in December, and plan to implement a refined petroleum price cap in February. Russia has said it won’t sell to anyone at the price cap, even if that means cutting production.
Europe has made up for the resulting shortfall in its oil supply by finding other sources, including increased imports from the US. That shift could turn the US into Europe’s top energy supplier this year.
Germany managed to complete in November — in record time — a brand new floating regasification terminal that increases its liquified natural gas (LNG) capacity, allowing the European Union to import more energy from the US (the world’s number one LNG exporter) than it did from Russia for several months last year, according to economics analyst Joey Politano.
While the trend reversed back late last year, it’s likely a temporary shift influenced by the December ban as countries tried to move oil around before the ban went into effect, Politano said.
It may just be a matter of time before the US is again on top.
The global impact of the price caps
While the price caps may allow Russia to increase its exports of Russian crude to Asia, since its easier to transport crude over long distances, a Moscow-based brokerage known as BCS predicted that the two caps combined could ultimately reduce Russian oil output by a million barrels a day by the end of the first quarter.
Not everyone is as convinced, however, that the caps will have such a dramatic impact. Brian O’Toole, a former senior adviser to the director of the Office of Foreign Assets Control in the US Treasury Department, told Quartz that the caps are more complex and much harder to enforce than outright bans.
Ben Cahill, a senior fellow at US-based Center for Strategic and International Studies, said it’s likely too soon to declare success on the energy sanctions.
“The market adjustment since December has been smooth, largely because oil prices have been dragged down by poor macroeconomic conditions,” Cahill said. “But the market is likely to tighten later this year, and it’s not clear how widely the price cap has been adopted, so it’s too early to celebrate.”