Cost Of Banning Russian Oil

The EU has announced plans to ban all Russian crude oil along with refined products such as petrol and diesel over the next nine months, dramatically ramping up western efforts to financially squeeze Vladimir Putin and end Europe's dependence on Russian energy.

- Ben Chapman

However, experts are sceptical that an embargo will be effective in depriving Putin of the funds he needs to fight a protracted and bloody war in Ukraine. They warn that it will be very difficult to stop Russian oil from entering the EU, and that the Kremlin will still be free to sell oil to much of the rest of the world.

What does it mean for Europe?

In short: more expensive fuel. News of an EU ban pushed oil prices up yesterday morning as markets processed the likelihood of further disruption to oil supplies. The price of Brent crude, a key international benchmark, jumped 3.6 per cent to $108 (£85.60) a barrel by mid-afternoon, while West Texas Intermediate was up 3.8 per cent.

If a ban goes ahead, prices that have already risen sharply in the wake of Russia's invasion of Ukraine are more likely to remain elevated. Over the coming weeks, that would feed through to pump prices, meaning further rises in the cost of petrol and diesel. Higher fuel prices will in turn put further upward pressure on the prices of other goods, as transport and energy costs rise.

Diesel, which is the primary fuel for lorries, has jumped even more than petrol prices this year, as the global economy continues its recovery from the pandemic, pushing up demand. Those diesel supplies could be put under further strain if a ban is implemented, says Alan Gelder, an oil industry expert at Wood Mackenzie.