Russia-Ukraine Crisis and Its Implications for Global Energy Markets
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Summary
The situation in Ukraine remains unresolved and uneasy, with potentially profound implications for geopolitics and energy markets.
Securing America’s Future Energy (SAFE) and Roubini Global Economics (RGE) see three possible scenarious developing: further Russian incursion into Eastern Ukraine (50 percent); continued destablization of Eastern and Southern Ukraine (40 percent); and de-escalation (10 percent).
Oil and natural gas prices are likely to increase at least moderately, with stronger increasses likely in the case of an invasion or open conflict. Implications for gas are more serious than those for oil.
We believe that high oil prices have emboldened the Russian government in its foreign policy (for greater detail, please see “Oil Security 2025” by SAFE’s Commission on Energy and Geopolitics). This suggests there may be more to come from Russia in a world where $100 oil is the “new normal.”
Russia is highly vulnerable to changes in the price of oil and gas, as these commodities account for 70 percent of the country’s export revenue and 50 percent of total government revenue.
