What Would A Ukrainian Victory Mean For Oil Prices?
2022.09.21 03:46
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Back in February, when Russia launched its invasion of Ukraine, a victory for Kyiv would have been almost impossible to imagine. It’s the classic David and Goliath. However, recent developments on the battlefront are starting to paint a different picture, showing the possibility of Ukraine ending the conflict with a win.
On paper, the war is just between Ukraine and Russia. On the other hand, its implications knew no bounds globally, bringing about economic uncertainties and causing supply chain disruptions. While the invasion did not start the energy crisis, it worsened the situation.
People hope it will be over soon, nearly seven months into the war. Along with these hopes is the dream that the underdog (and innocent party) will claim victory.
A Win for Ukraine?
Earlier in September, Ukrainian forces managed to recapture swaths of lands in the country’s northeast that a few months earlier had been taken over by Russia. Considering this and the possibility that China’s tacit support for Russia could be waning, it seems like momentum is on the side of Ukraine.
If that indeed happens, it could mean good things for Ukraine and probably for the rest of Europe. Orysia Lutsevych, in an opinion piece for The Guardian, wrote that a victory for Ukraine is vital for Europe to be able to live in peace and work collectively to meet global challenges.
Considering the support that a majority of the remainder of Europe and countries in other parts of the world have thrown behind Ukraine, defeat would further entice Russia to flout international law and the sovereignty of other nations. Lutsevych added,
“The restoration of Ukrainian territorial integrity and, ultimately, peace will mean the collapse of Putinism as a doctrine and an end to Russian claims to territorial dominance elsewhere in eastern Europe and Central Asia,”
On the other hand, a victory for Russia would validate the country’s aggressiveness and fuel its desire to expand its territory further. Russia uses newly conquered territories to stage further conflicts, and a Ukraine victory would prevent that.
Aside from preventing future wars, a victory for Ukraine is also expected to reduce the risk of mass famine and even restore the stability of economies that have been affected by the sanctions imposed on Russia for instigating the conflict.
What Happens To Oil If Ukraine Wins The War?
When the war started, the price of surged past the $130 per barrel mark for the first time since 2008. The Brent benchmark neared the record high of $147 in March, exacerbated by the conflict.
Almost seven months into the war, oil prices somehow stabilized and are now at ~$90 per barrel for as concerns about weaker economic growth and demand drag prices down.
European countries have also been forced to impose price caps on electricity and oil and come up with new taxes for energy companies to support their people amid the ongoing energy crisis in the region. Many countries have also started finding alternative energy sources to compensate for the supply cut-off from Russia.
Russia has used the energy crisis as another ploy in its grand battle scheme. In September, Vladimir Putin said,
“We will not supply anything at all if it is contrary to our interests. No gas, no oil, no coal, no fuel oil, nothing.”
The potential impacts on the energy market of a Ukraine victory would depend on how Russia will take its defeat. Will it be a gracious loser and choose to capitalize on rebuilding bridges with countries that have been beneficiaries of its supply or a petty loser that will continue to lock in supply for it to use and to sell to select buyers who are probably allies and supporters?
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