WESTERN sanctions against Russia has created an interesting situation in the oil market. It has forced European countries to stop (or try to a stop) importing Russian oil, causing somewhat of a crisis in Europe. For the importing countries it has led to the problem of power shortages. For Russia, it meant the loss of its leading market.
For a long time, Russia has functioned as an oil and natural commodities exporter. With the ongoing war, and the sanctions this means the loss of that particular niche in the global economy. For some Russian supporters, the solution to this problem is simple. Find new customers.
Unfortunately, this is easier said than done. Russia cannot shift their European exports to Asia, for one simple reason: Russian oil exports are delivered through pipes. Those pipes do not exist for Asian markets. So the Russians and their customers will have no choice but to look to oil tankers, and they will cost more money.
Further, Asian customers are not behaving as enthusiastically as expected. India is willing to buy Russian oil, but only at a very high discount, while China has not made any moves on the matter that I’m aware of. Other Asian countries may step up and take up Russia’s offer, but currently many are still suffering the after results of the Corona lockdowns, and lack the economic surplus to buy more oil.
So looking at the situation, I think we may see a power crisis not too far in the future as well as a shift back to coal. Not good news for those who are concerned about the climate, but that is the situation. As power production increases, and as oil logistics change, coal may be the cheaper, more practical alternative.
China is already doing this. It is currently the number one producer (3.7 million tonnes per year) and consumer of coal, and if the situation gets worse, India may follow. If oil logistics is crippled by the war in Ukraine, this may be the future for all developing countries, including the Philippines./PN
