Ukraine Russia War: If Oil Ban Remains in Place, May Cut Gas Supplies

If the West goes ahead with a ban on Russian oil, Russia has threatened to shut down its main gas pipeline to Germany.

The rejection of Russian oil, according to Deputy Prime Minister Alexander Novak, would have “catastrophic consequences for the global market,” causing prices to more than double to $300 a barrel. As a means of punishing Russia for its invasion of Ukraine, the US has been discussing a possible ban with allies. On Monday, however, Germany and the Netherlands both rejected the plan.

The EU imports roughly 40% of its gas and 30% of its oil from Russia, and there are no easy alternatives if supplies are disrupted.

While the UK would not be directly affected by a supply disruption because it imports less than 5% of its gas from Russia, it would be affected by rising global market prices as European demand grows. Russia is the world’s second-largest gas producer and third-largest oil exporter, and any sanctions against its energy sector would be disastrous for the country’s economy.

Although sanctioning Russia’s oil and gas exports is appealing, “practically it is challenging,” according to Nathan Piper, head of oil and gas research at Investec.

Ukraine has urged the West to impose an oil and gas embargo, but there are concerns that this would drive up prices. Fears of an embargo pushed Brent crude oil up to $139 (£106) a barrel on Monday, its highest level in nearly 14 years.

Brent crude prices were little changed on Tuesday, with a barrel costing $121, up 3%.

Meanwhile, wholesale gas prices increased to 565p per therm from 501p earlier in the day.

Following a volatile Monday caused by US discussions about a potential Russian oil and gas ban, UK stock markets rose slightly in early trading.

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