After Ukraine, how will the world replace Russia’s oil products?
As Boris Johnson flew to the Gulf this week to ask for more oil to replace supplies from Russia, he was accused by the Labour leader, Keir Starmer, of “going cap in hand from dictator to dictator”.
At the same time, a report produced by the International Energy Agency (IEA) underlined just how limited the options are for any economy seeking to replace Russian crude and other oil products.
It says global oil demand is projected to be nearly 100m barrels per day (bpd) this year, lower than previously forecast because of the shock to global growth caused by the war in Ukraine. Russia produces about 10m bpd and exports about half of that plus about 3m bpd of oil products. It is unclear, however, how much of that supply might now be at stake.
The IEA thinks that at least 1.5m bpd of oil and 1m bpd of oil products are likely to be lost from Russia, from April until at least the end of the year, as buyers either reject supplies voluntarily or do so to avoid breaching sanctions. It says: “These losses could deepen should bans or public censure accelerate.”
“In reality, no one country can plug the hole that Russia would leave in the market in the event of a global ban,” says Sophie Udubasceanu, global crude oil expert at energy market analysts ICIS. So where can the world try to source anything up to 5m extra barrels of oil a day?
It is no surprise that the Gulf should be the first stop on the UK prime minister’s itinerary. Saudi, with 2m bpd spare, and the United Arab Emirates with 1.1m bpd are the only two leading oil producers with immediate spare capacity to offset a Russian shortfall. As the IEA notes, however, they are so far “showing no willingness to tap into reserves”.
Both are members of the Opec+ cartel of oil-producing
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