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ONE of the main consequences of the Russian invasion of Ukraine is the loss of Russia’s grip on its gas and oil supply to Europe, and an end to its monopoly of its biggest market with its huge investments in all related activities in the energy market, in every part of of the energy business from upstream to downstream, from drilling, pipeline, refining, gas retails stations, with full scale investments, joint operations, and ownership of companies. Now everything is gone, and newcomers are hitting the doors of Europe with their own merchandising and long term plans with a new outlook and diversification.
For the first time, Europe is realizing the end of the one-party control of its energy market, and has announced its freedom of the dominance of Russian control. Now the US gas, along with Qatari gas and the UAE LNG are coming in large overseas carriers, followed by the US and Arabian oils. All are seeking at the same time a small percentage of a share of the oil market, which totals about 833 million tons per annum or about 18.5 million barrels per day. Germany is the biggest consumer with 100 million tons, followed by France, UK, Spain, and Italy in the positions of the top five European countries.
While Kuwait consumes about 9 million tons of finished petroleum products, three modernized refineries are looking for safe and secure long term outlets. The same is with Saudi Aramco. The USA is now using the opportunity to push for more crude oil to be exported to Europe, support its local oil investors and push for more oil discoveries. It is reducing its daily oil inventories for better oil prices. It is pushing the oil volume by more than 40 percent than last year or 1. 5 million barrels per day of more oil. The gas supply has almost doubled or reached 50 percent over the 2021 volume.
It is indeed the end of the Russian energy supply to Europe. It is a great lesson for any country that is relying heavily on only one source of supply. At the same time, Russia is losing more than 46 percent of its foreign income from energy income, while its war expenses have increased by close to 60 percent. Europe’s gas price is still three times higher than before the European boycott. It is seven times higher than the rate for USA consumers.
It may be so for the next few years until such a time when it gets its supply route in order with new suppliers and new logistics that suit the future supply pattern. Yes, Europe did escape the mild winter of the current year with a high level of gas inventory, but this may not be the case in the future years. It must be ready for the same level of gas inventory for the fourth quarter of the current year. Of course, the new situation led to harming the environment by using coal and opening the old mines, while also using nuclear energy, which so far has proven to be safe.
It is time for Europe to also investigate the alternative of green energy, through the use of solar energy in expanding and exploring non fossil fuels and the powers of winds and sun. Time is right for Europe to jumpstart and initiate ideas, since it has freed itself from a sole supplier of energy. This serves as a lesson to all of us to stay far away from any form of monopoly or the control of a single supplier.
By Kamel Al-Harami
Independent Oil Analyst