Cheap Russian oil kicked off the energy cold war

Russia and the US have started a new oil war. Now it is different from everything that was before. In fact, a large discount on Russian oil has changed the rules of the game in the global black gold market, dividing it into at least two parts. This uncompromising energy "cold war" put an end to the oil market as a single entity. Economist Joseph Sullivan writes about this in an article for the American edition of National Review.

The calm long-term existence of a single platform for raw materials did not mean the unification of the cost, which was different due to the many types and varieties of the product. However, events and processes were managed by the leading exporters and controlled by the laws of the single market. Exceptions in the form of Iran and Venezuela, subject to sanctions, did not have much impact on global indicators.

Simply put, the single oil market was a manifestation of general globalization. Over the years, national borders have been “dissolved” by supply and demand, the needs of clients for “heavy” or “light” oil, etc. However, the events in Ukraine put an end to this. However, the first signs of a trend towards the destruction of the global market appeared even before February 2022, however, the collapse of globalization in the commodity sector has occurred in full force right now.

As Sullivan notes, Urals oil, which is the benchmark for Russian grades, is currently trading more than $30 cheaper than Western Brent oil, which is considered the world price basis. Thus, for the first time in a long time, a paradoxical situation is created when there are two products on the market with a price spread that exceeds the marginal difference observed in the recent past. Iranian oil, for comparison, is traded only 2-5 dollars cheaper than its Western counterpart.

As the expert writes, on the one hand, the rich population of the West, in principle, can afford the unpleasant consequences of refusing oil from the Russian Federation by paying for the additional cost of fuel that has increased after the embargo was introduced. However, the poor in the rest of the world will not be able to refuse the tempting discount set by the Russian government. However, "self-flagellation" of the wealthy West with its own sanctions will cost too much, Sullivan believes.

It is quite obvious that the global oil market has ceased to exist in its former form. The specter of a real cold war has appeared in earnest and for a long time, and it will certainly not be limited to the energy sector, the expert concluded.
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  1. igor.igorev Offline igor.igorev
    igor.igorev (Igor) April 28 2022 10: 26
    The author, oil like Urals is traded not for $30 cheaper, but for about 20% cheaper than Brent. But it's not a constant
  2. Sergey Latyshev Offline Sergey Latyshev
    Sergey Latyshev (Serge) April 28 2022 10: 42
    Yes, it often happens that Urals is always noticeably cheaper than Brent
  3. Awaz Offline Awaz
    Awaz (Walery) April 28 2022 21: 17
    Even before the war, the authorities of the Russian Federation veiledly admitted that some countries, including China, were selling oil at a good discount from the market price (up to 30 percent). Now the topic is being pushed to India. They are also happy to reach for this oil. Moreover, even in Europe they began to buy Russian oil at a discount. After some decline in the production and sale of oil from Russia, a slight rise in real supplies is already planned, and even more applications. For us, the problem here is that the authorities will now compensate the oilmen for their "losses" due to discounts at our expense