The international response to the drop in Russian supply has been overwhelming, with countries tapping strategic reserves far beyond what’s needed to replace lost barrels, reports the Business Standard.
The Energy War
Russia’s invasion of Ukraine is a multidimensional war. There’s the hideous and bloody military conflict. And there’s the grueling and costly economic battle — fought above all in the energy market. Gas molecules and oil barrels are weapons just as tanks and drones are.
We now have a year’s worth of data to quantify the energy weapons deployed, and the tally is stark: In 2022, barrels from the West outgunned Russia by almost 3-to-1.
First, the Russian data: The country’s total oil production — including crude, condensates and natural gas liquids — sank by about 122 million barrels from last year’s peak in February, just before the invasion.
Most of that decline took place over two months — April and May accounted for 56 million barrels of the drop. But much of the slump was subsequently clawed back, with December’s output just 6 million barrels below February’s, or 200,000 barrels a day.
Moscow didn’t reduce its production voluntarily — although it did enjoy the price upside that followed. Traditional buyers of Russian crude fled the market in droves, months before most sanctions actually kicked in.
Decline in supply
The international response to the decline in supply was overwhelming. The US and its allies, under the umbrella of the International Energy Agency, released about 314 million barrels from strategic petroleum reserves. Put simply, for each Russian barrel lost from the market in 2022, key IEA members added almost 2.6 barrels from emergency stockpiles. The bulk came from America — roughly 222 million barrels over the year. The rest, in two tranches, flowed from Germany, Japan, France, Spain, the UK and a few others.
The near 3-to-1 ratio shows that the US and its allies used their strategic reserves far beyond what was needed to replace the physical shortage created by Russia. They tapped extra barrels to push prices down. They were not just fighting Russia, but the OPEC+ cartel, too. All’s fair in war.
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Source: The Business Standard