A potential Russian invasion of Ukraine would not only be a massive humanitarian crisis, but it could also potentially upend the world energy economy. Projections show an invasion would send prices for gasoline and other energy products surging for consumers at a time when they’re already dealing with historic inflation.
Russia is responsible for a reported 10% of global energy production, but in the event of an invasion that tap could close for European nations and the US, which is threatening severe sanctions should Russian troops cross the border.
“The first thing you would see is a spike in both oil and gas prices, in our case, it would be LNG prices, mostly because of the inability to completely replace the gas lost to Europe,” Tulane Energy Institute Associate Director Professor Eric Smith told WWL.
JP Morgan estimates oil would surge to $120 a barrel, up from the low $90 dollar a barrel range it’s in right now. Some projections are even more drastic, forecasting $150 dollar a barrel oil, at least temporarily. Tulane Energy Institute Associate Director Professor Eric Smith told WWL prices in that range are a real possibility if Ukraine is invaded.
“It would not be pretty and we would see a spike,” said Smith. “You could see spikes like that level, momentary spot prices.”
Should Europe lose access to Russian energy products they’d likely lean heavily on the US to fill the fuel gap. That’s easier said than done.
“Right now we are exporting as much as we can to Europe,” said Smith.
Smith with the Tulane Energy Institute said because the US has increased domestic production of oil and gas we’re unlikely to see shortages, even if we do endure higher prices.
“Of our total consumption we are importing a much smaller fraction than we were ten years ago,” said Smith who added the US has a diverse range of partners to import gas from. “It all doesn’t come from Russia, it comes from a variety of sources such as Canada.”
