Why is no-one talking about European dependency on Russian oil?
Amidst the assumptions and accusations currently flooding the internet and air waves re flight MH17, the call for ‘stronger sanctions’ against Russia from the US government is loud and clear. Occasionally a news story notes the effect such sanctions might have on Europe’s gas supply (Europe gets 40% of its gas from Russia) however, strangely, I can find no mention of Russian oil which is actually of equal if not greater concern to Europe.
Europe consumes far more oil than it produces. In 2013 it consumed more than 4 times the amount produced and production is falling in the few European oil producing countries (Denmark, Italy, Norway, UK & Romania). Hence we are COMPLETELY DEPENDENT on importing the oil we need from countries that produce a surplus.
This is less of a problem for the US although, despite the much hyped shale gas and oil ‘revolution’, the US still produces only around half the oil it consumes.
According to the BP Statistical Review of World Energy 2014, in 2013 Europe imported nearly half of its oil from the Former Soviet Union (FSU)*; 5,989 thousand barrels per day (kbpd) out of total imports of 12,637 kbpd. The US however imports a comparatively tiny amount of oil from the FSU.
So whilst the US government may have little to lose from antagonising Mr. Putin, the same certainly cannot be said of European governments.
Don’t expect EU heads of state to be falling over themselves to impose meaningful sanctions on Russia, and if they do you better be sure you are prepared for some difficult consequences. If Russia ceases to supply Europe with oil, no other oil producer could take up the slack at short notice, if at all. Whereas its not hard to imagine that Russia could find alternative markets for ‘Europe’s’ oil by increasing its exports to Asia and China.
Whilst economics remains largely a mystery to me, no matter how much I read about it, I can’t help wondering if, as well as dropping Europe in the doo-dah, current US foreign policy may yet come back and bite them from behind. Might Russia and China take the opportunity to expand their energy trade into alternative currencies and finally break the dominance of the ‘oil dollar’? We shall see.
*The FSU includes Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Russian Federation, Tajikistan, Turkmenistan, Ukraine & Uzbekistan, but Russia is by far the largest oil producer.