The EU bans most Russian oil, but an insurance ban could hit Moscow where it really hurts
Crude crackdown… The EU’s planning its toughest restrictions on Russia yet, as Moscow enters its fourth month of fighting in Ukraine. Today EU officials are expected to greenlight their sixth sanctions package, which includes an embargo of Russian oil. Energy prices surged on the news, with Brent crude (aka: the international benchmark) hitting $120/barrel.
- What’s included: A ban on Russian oil that comes into the EU by sea, which would be 90% of all oil imports by the end of the year.
- What’s not: There’s an exemption for oil coming in by pipeline (the remaining 10%), a concession made for the landlocked Hungary, Slovakia, and Czech Republic.
A trifecta of oil problems… could be about to spill over. While Russia’s war on Ukraine is already aggravating the global oil crunch, experts say an embargo could spur an even bigger ripple effect for insatiable energy markets.
- In the US: The release of 1M barrels of oil a day from the strategic reserve hasn't been enough to temper soaring pump prices as summer travel szn kicks off.
- In China: The loosening of Covid lockdowns in cities like Shanghai could supercharge demand as the world's second-largest oil consumer prepares to reopen.
- Everywhere else: Refineries are already running at full capacity — and still struggling to meet demand.
Europe has another sanction up its sleeve… Russia’s still exporting oil to willing buyers like China and India (at discounted prices). One thing that could make that harder: cutting off the ability to insure tankers carrying Russian crude. The UK and EU — which control much of the maritime-insurance industry — are reportedly about to do just that. If Moscow can't insure its tankers, it’ll be effectively cut off from exporting oil by sea. Less oil on the market = even higher prices for the world.