The Russian invasion of Ukraine began a week ago. Since then, the world has watched with anticipation as the Russian war machines unfold, the biggest ground war in Europe since World War II. While the Ukrainian people are fighting for their country, many countries and companies have agreed to support Ukraine by plunging the Russian economy into oblivion. However, just last week, Shell, the British oil company, was still buying Russian oil at a discount. This morning, the CEO of Shell changed his mind.
Shell agrees to stop buying Russian oil
According to the Washington Post, Shell has suspended operations in Russia with BP and ExxonMobil. Prior to this morning, Shell was still buying “spot” Russian crude oil. This is because Russia was selling its crude oil at a huge discount. However, since this morning the CEO of Shell has issued an apology for continuing to support the Russian oil sector.
“The company will initially halt all spot purchases of Russian crude oil,” the London-based company said in a statement. “It will also close its gas stations, aviation fuels and lubricants operations in Russia. »
Ben van Beurden, CEO of Shell, apologized for buying Russian oil last week. In a bid to ease the pressure after a week of intense backlash against Shell, Beurden agreed to 'commit the profits from the limited and remaining quantities of Russian oil that we will process into a dedicated fund' to humanitarian aid for the crisis in Ukraine.
“We are fully aware that our decision last week to buy a shipment of Russian crude oil to refine it into products like gasoline and diesel…was not the right one, and we are sorry for that,” van said. Beurden in a statement.
Is Russia driving up gas prices?
After Russian forces attacked Ukraine unprovoked last week, many major world powers and companies called for sanctions and embargoes against Russia. The embargo on the private sector has also made waves in the Russian economy and ours. We see only too well how to rely on unstable nations for something as essential to our infrastructure as gasoline. We also had a little taste with the Taliban.
The US national average price for a gallon of gasoline hit $4.17 this week. According to the AAA gas prices website, this is the highest average gas price we've seen since the company started tracking them in 2000. Although Shell eventually honored the oil embargo , this will probably deal another blow to the Russian economy and our ever- increasing gas prices.
Despite BP's early move to suspend operations in Russia, the company's spokesperson is not too bold with the language used to buy Russian oil in the future. The spokesperson said BP "will continue to meet existing contractual obligations subject to compliance with sanctions, security and shipping requirements and where safe to do so".
Will Russian sanctions work?
According to the New York Times, Russia is by no means the world's largest oil supplier, but the country provides 12% of the world's oil. While sanctions and embargoes are important, we can't put them in place without being a little slapped in the face of hindsight.
Europe is really feeling the sting. This week, Russia threatened to cut off gas to Europe, which would force the price of oil to rise to $300 a barrel. As President Biden pushes for more global support by rejecting Russian oil, European countries are understandably more hesitant.
Luckily, Russia isn't the only game in town. More and more Western countries, including the United States, have turned to Iran and Venezuela to broker deals to get their oil to market. This war and/or its effects are likely to last for some time. The interdependence of Russian oil on the world market makes it a tough adversary.