According to energy expert Dan Yergin, Russian President Vladimir Putin will pay a price if “weaponization” of gas supplies to Europe as Russia-Ukraine tensions rise.
The more likely scenario, therefore, is that gas supplies could be disrupted by violence in the region, rather than by weaponization, he told CNBC’s “Squawk Box Asia” on Tuesday.
“So [Putin] Yergin, vice president of IHS Markit, said it was possible to weaponize it in a broader sense, and then Europe would have to scramble – but it would do profound damage to the future of natural gas markets. him if he does it,” said Yergin, vice president of IHS Markit, thinking it’s more likely that the disruption will be caused by the violence in the region, combined with the sanctions.
Russia supplies more than 30% of Europe’s natural gas, and Europe’s gas markets are connected by a network of pipelines, some of which pass through Ukraine.
Yergin warned last month that the Russia-Ukraine crisis is an overhang on the gas market.
In the past, the Kremlin has used energy as a tool for political pressure. It cut off Ukraine’s gas supplies due to a price dispute in 2006 and again in 2014, after it annexed Crimea. In 2009, Russia again cut off gas supplies – this time to Europe through Ukraine.
Tensions between Russia and Ukraine add in recent months as Russia has reinforced some 100,000 troops along its border with Ukraine.
It raised concerns that Russia might be preparing to invade the country, and raised concerns that the Kremlin would repeat its illegal annexation and occupation of Crimea in 2014. Moscow has repeatedly denied those allegations.
Any confrontation has the potential to destabilize the entire region due to Ukraine’s position – separating Russia and the EU.
The crisis has sparked talk US may impose sanctions on Russia to prevent the Kremlin from invading Ukraine.
100 dollars of oil
There’s a lot of anxiety in the oil market right now, Yergin said. Prices have risen on tight supply, but are also getting support from Russia-Ukraine tensions.
Basically, the only place in the world where you have a backup that can be called in in an emergency, are just two countries – Saudi Arabia and Abu Dhabi, and that’s the definition of a tight market.
Dan Yergin
Vice President of IHS Markit
Crude oil prices recently spiked above $90 a barrel, up nearly 20 percent this year and up more than 60 percent since the start of 2021.
Some analysts have predicted that oil prices could soar to $100 a barrel.
Yergin says it could be a reenactment of 2011, when the price of crude rose to $100 and stayed there for three years.
“I think right now we have a crisis-prone market,” he said.
OPEC and its non-OPEC partners, an energy alliance known as OPEC+, have decided returned some supply to the market, adding 400,000 barrels per day in March.
But Yergin said it may be difficult for some manufacturers to return to previous production levels.
“Not all producers can go back to their old levels, because of no investment, because of lack of maintenance. And so they’re not putting 400,000 bpd back on the market. They’re putting less. “, he told CNBC.
“Basically the only place in the world where you have a backup that can be called in an emergency, are just two countries – Saudi Arabia and Abu Dhabi, and that’s the definition of a tight market,” Yergin added.
