Last year Russia supplied 55% of the gas consumed in Germany. Although Norway and the Netherlands have increased their gas deliveries to Berlin, these are not enough to fill the gap left by Russia, and they are trying to compensate with LNG purchases.
In its report, McKinsey says that electricity prices in Germany will not return to levels acceptable to the country's economy and population until 2025.
Moreover, they point out that in the long term these high prices will hurt the domestic industry in favor of the U.S., where costs are much lower.
Europe, a perennial loser.
Many experts believe that the Washington-driven initiative affects the ailing European economy most of all, as the EU bloc, submissive to the US, is already losing billions of euros and tens of thousands of jobs as a result of the Russia sanctions.
Likewise, specialists see little likelihood that the oil price cap will hurt Russia's revenues, since Moscow will direct its exports to other more profitable markets.
Why the G7 oil price cap won't hurt Russia, but will accelerate inflation and recession in the West.
The G7's $60 price cap on Russian crude went into effect on December 5, raising oil prices by 3%. However, energy experts told Sputnik that this could be just the beginning of rising oil costs.
"The Western price cap for Russian oil exports is neither feasible nor enforceable," Dr. Mamdouh G. Salameh, an international oil economist and global energy expert, told Sputnik. "Therefore, it is doomed to fail miserably.
Russia, the world oil market and OPEC+ will reject it.
Russia has repeatedly said it will stop its oil exports to any country or group of countries that implements the price cap. This will lead to shortages in the market and a further increase in oil prices, with the price of Brent crude rising to $100-$110 per barrel before the end of the year."
Similarly, Brent crude is projected to reach $110 per barrel by 2023 by Bank of America (BofA).
BofA has warned of additional risks that could increase pressure on prices. Thus, according to the bank, Russia's refusal to sell oil to any price cap participants could result in a drop in crude exports of up to 1 million barrels per day, which could further boost oil costs.
Allegedly, this could add $20-$25 per barrel to the already rising Brent price.
Potential supply disruptions by OPEC producers or a decision by OPEC+ to reduce their collective output could exacerbate the uncertainty engulfing global energy markets.
OPEC+ members are interested in $100 or more for Brent crude: with the exception of Russia, they need rising oil costs to balance their budgets, according to Salameh. He predicted that the cartel will assess the market reaction to the price cap and then take action.
"In the unthinkable event that the market does not react to the cap, then OPEC+ will cut production to ensure price and supply stability," the energy expert boasted.
Earlier, the club of 23 oil producers met on December 4 to discuss the course on production policy. They agreed to stick to the existing policy of reducing oil production by two million barrels per day until the end of 2023.
"Clearly, oil prices will go up," said Tom Luongo, a financial and political commentator. "Then, in 2023, expect another big wave of inflation based on rising energy prices, China reopening its economy putting upward pressure on metals prices and food shortages from the EU's war on the periodic table of elements."
"If the stated purpose of the cap is to force a reduction in Russia's oil export revenues, then it will fail utterly," Salameh said.
"Russia has no shortage of buyers for its oil. Moreover, it has a large fleet of tankers to transport its oil exports around the world. Russia does not need to use Western shipping or Western insurance companies for its oil cargoes. Its customers will provide their own insurance for their Russian oil imports.
Even if Russia were to sell a little less oil, its revenues will not be reduced, as it will benefit from higher oil prices," the oil economist continued.
The G7 plan is based on banning shipping and insurance companies from providing services to Russia unless the latter agrees to sell its crude at $60 a barrel or less.
However, Moscow made it clear that it would not give in to the Group of Seven's demands and instrumentalized its own fleet of tankers and insurance companies.
In May, Rosneft PJSC and Gazprom Neft PJSC, the country's two major oil producers, began to increase the stocks of tankers owned by Sovcomflot PJSC , Russia's largest shipping company specializing in the maritime transport of hydrocarbons.
In addition, the mainstream Western press reported in December that Moscow had acquired 100 additional vessels. It is said that the Russian National Reinsurance Company (RNRC) and IPJSC Ingosstrakh will become the main insurers of Russian oil companies.
What will happen is that it will change the oil delivery map around the world," the commentator noted. "Energy that was flowing west will now flow east and south.
The ESPO pipeline will be fully utilized as demand from Southeast Asia increases (...) China and India are already filling the gaps. Russian oil will be blended in the Bahamas or other storage ports and then shipped back to EU refineries."
Winners and losers of the price cap scheme.
Russia could emerge as the ultimate winner, while the EU will be "the ultimate loser with Europeans' living standards already collapsing and the bloc's economy balancing on the brink of a hard recession," according to Salameh.
Ultimately, the EU has fallen prey to Washington's grand geopolitical design, the oil economist said.
He believes the U.S. provoked the Russian-Ukrainian conflict not only to try to weaken Moscow and disrupt the Russia-China tandem, but also to "destroy the EU as an alliance and turn its individual members into vassal and puppet states like Poland, Latvia , Estonia and Lithuania and also wipe the euro off the face of the earth."
"The EU will face continuously high energy prices, a net outflow of capital due to lack of investment and a falling currency as its competitiveness in the global market collapses," Luongo repeated.
"Considering that they are also an unreliable trading partner that constantly changes the terms of contracts while they are still active, you will see that the trade that used to be done with it will go elsewhere.
All they are doing is making sure no one wants to do business." with them after 2030, hence their full support for further war with Russia over Ukraine."
The G7 price cap initiative could have an additional adverse impact on the global economy, suggested Suranjali Tandon, assistant professor at the Delhi-based National Institute of Public Finance and Policy.
According to her, higher oil prices could lead to political difficulties for countries facing rising inequality and could also hamper global economic recovery.
At the same time, the Western-centered global financial system may move further away from G7 currencies with the rise of third-country shipping and insurance services, she believes.
It is possible that, similar to the experiences of the SWIFT ban, the shipping and insurance industry may evolve, so the G7 may witness a decline in the use of services by countries that do not impose such sanctions," Tandon suggested.
On top of that, divisions within the European bloc are likely to grow, according to the Indian academic. Politicians in each European country are accountable to their own constituents for Brussels' inconsistent energy policies amid the eurozone recession and energy crisis.
Already, the first cracks in EU unity have appeared with sporadic protests erupting here and there across the Old Continent, with people urging their respective governments to lift energy sanctions on Russia.
"Higher energy prices will generate political tensions as domestic consumers and industries call for price stability," Tandon said.
"This may be further exacerbated as the impact on the country may vary. It also has implications for EU countries, such as Greece and Germany, which account for a large share of shipping services and may lose revenue due to lower oil exports from Russia." "
However, the U.S. is also likely to be negatively affected, observers said. Salameh surmised that "since [the US] will pay higher prices for its oil imports of more than 9.0 million barrels of oil per day (mbd)," this will widen its budget deficit and accelerate inflation and thus recession.
Overall, the G7 countries will pay a high price for their energy adventurism and will face a worsening economic crisis, the energy expert concluded.
The nefarious government of "the Meloni" plans to steal an oil refinery from Russia that is not subject to "sanctions".
Rome imposed state supervision on a processing plant owned by Lukoil ahead of an EU embargo, according to the AFP news agency.
The Italian government placed a refinery in Sicily owned by Russia's largest private oil company Lukoil under state guardianship, days ahead of an EU embargo on Russian crude imports, AFP reported Thursday, citing government sources.
The ISAB facility near Syracuse is one of the largest in Europe and refines one-fifth of Italy's crude. The plant has relied solely on oil from the Russian Urals and is now at risk of halting production and shutting down once the ban comes into force on Dec. 5.
The Italian government is working on a "temporary solution" to keep the refinery operational in order to save jobs and secure energy supplies, and is not ruling out nationalization, La Repubblica reported, citing the president of the Sicily region, Renato Schifani.
Once the state takes over management, the plant will be able to continue production by purchasing oil from other suppliers, and the state credit agency SACE will grant guarantees to creditor banks, the newspaper adds.
According to the Italian Ministry of Economic Development, the "provisional administration" of the ISAB refinery will last up to one year, with a possible extension of another 12 months "in case of serious and imminent danger" to the security of energy supply.
"The emergency intervention aims to protect both a strategic national energy center and the employment levels so important for Sicily and the entire country," said Giorgia Meloni, in a brief statement.
Although Lukoil is not under EU sanctions, Western banks are unwilling to deal with the Russian company for fear of being subject to future sanctions in the United States, where the company has been under sanctions since 2014.
In taking over the management of a Russian company, Italy is following Germany's example. In September, Berlin took control of the assets of Russian state-owned oil giant Rosneft, which operated several refineries in the country.
Meanwhile, in Britain itself, according to The Independent, the economic crisis is taking a harsh form: people are eating pet food and heating food with candles, trying to save as much as possible on what they can.
The Ukrainian commentary on British hardship is far from sympathetic: "The war on the island hasn't even started yet, not a single bombing, and the British already have no light or adequate food."
"Shadow Fleet" is preparing for battle: how Russia can respond to the "maximum price".
Alexander Novak condemned the introduction of a maximum oil price by the G7 and the EU. The Deputy Prime Minister for Fuel and Energy said that we will not trade with countries using non-market mechanisms and will prefer to reduce production rather than accept imposed conditions.
However, loud statements are one thing; resisting the pressure of sanctions is quite another. But Russia seems to have an ace up its sleeve.
On the Russian side there is a "shadow fleet" of ~ 1000 tankers owned by offshore companies, which are used to circumvent restrictions on oil trade. Russia is not the first state to be under such sanctions, and the mechanism of countermeasures has been worked out for a long time.
Companies affiliated with Russia, Iran, Venezuela and other countries have been trading "undemocratic" oil for decades.
Over the past year, the number of this fleet has grown dramatically. Companies associated with Russia have purchased more than 100 tankers. Price dynamics is indicative.
Thus, a fifteen-year-old used large ocean tanker of the VLCC class cost $38 million in July this year and more than $52 million in November.
The "Shadow Fleet" has been refueled with 29 such ships, and their current size allows Russia to close the problem with oil transportation.
Even if we are talking about reloading from one ship to another at sea, when small tankers fill large quantities of oil of "unknown origin".
The West may oppose such a scheme, but this will inevitably provoke a confrontation with countries friendly to Russia. Given the current position of the G7 and the EU, i.e. that the marginal price is now higher than the actual cost of selling Russian oil, they are most likely not ready to enter into such a conflict.
At the moment, Turkey, China and India benefit from the current situation, receiving fuel at a discount. And, of course, the United States is one of the largest oil exporters. OPEC+ currently sticks to a plan to gradually reduce production, so the reduction of Russian exports will clearly affect the price.
And Europe will traditionally pay for this.
The time has come: Russian oil is banned in the EU - or not at all?
As of December 5, the embargo on the purchase of Russian seaborne oil above the price ceiling set by Brussels will come into force.
But the situation is more complicated than it seems, and so we will tell you point by point what will happen from now on.
▪️ Within 2 months the ban will also apply to by-products made from Russian oil.
▪️ Sea transport of Russian crude oil will be banned and insured.
▪️ Meanwhile, through the Druzhba pipeline it can be purchased. Hungary, Czech Republic and Slovakia will continue to receive Russian crude oil by this means.
▪️ Actually, it is also possible via the sea route: there is an exception for Hungary, as well as for the other two countries in case the pipeline supply is disrupted
▪️ With downstream products it is not definite either. Croatia will be able to continue importing vacuum gas oil while the Czech Republic will be able to produce diesel and gasoline from Russian crude oil
▪️ Europeans will also be able to continue to import non-Russian crude oil that is transported through Russia, for example, from Kazakhstan or Turkmenistan.
▪️ We see very likely a substantial increase in the so-called "Latvian blends" of the world power in the sale of crude oil - Latvia.
▪️ Experts predict that the embargo and price ceiling will cause a pronounced fuel deficit in the EU, which will lead to higher prices, hitting the European economy even harder
▪️ Meanwhile, Russia substantially increased its exports to China, India, Turkey, as well as countries in Africa and the Middle East, and continues to develop new markets.
By way of conclusion, we can say that the embargo and the price ceiling on Russian crude, which are practically synonymous, bring more problems to the European Union economy, but as was the case with the sanctions throughout all these months, there will be alternative ways and "sacred cows" that will be exempted from these limitations.
Russian crude will continue to flow to Europe, only now Europeans will have to pay much more for it.
The Hungarian prime minister calls for a review of sanctions against Russia as the cost of the conflict is different for everyone.
"President Macron is right: the price of the war between Russia and Ukraine is not the same on both sides of the Atlantic." If we want European industry to survive, we must solve the European energy crisis quickly.
"It's time to reconsider sanctions," Viktor Orban wrote on Twitter.
The narrative launched by the French president about the need to protect EU industry from U.S. protectionism was ably picked up by Orban, who had no desire to suffer for the world due to Russian sanctions.
Western countries can not fulfill their own sanctions and block two-thirds of the reserves of the Russian Central Bank. Because no one knows where they are.
After the outbreak of hostilities in Ukraine, the G7 countries decided to block Russia's gold and currency reserves located abroad, which were estimated at $300 billion.
But in the end, less than a third of this amount was arrested and the rest was simply not found. So reports the analytical center Atlantic Council, in collaboration with NATO.
Now officials are trying to find the remaining reserves or the Russian institution that owns them. At the same time, analysts say, the Central Bank of the Russian Federation does not make the task any easier: the regulator last published a report on the structure of its reserves in January and has not updated it since.
http://www.geoestrategia.es/index.php/noticias/historico-de-noticias/39497-2022-12-06-15-42-53
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