BAKU, Azerbaijan, March 8
By Leman Zeynalova – Trend:
A complete ban on Russian energy imports would cause the prices of Brent crude oil and European natural gas to surge to $160pb and €300/MWh in the near term and settle at still very high levels into next year, Trend reports with reference to the UK-based Capital Economics research and consulting company.
“The Russian economy would contract by as much as 25 percent, causing sovereign and corporate default risks to crystallize. Inflation in advanced economies would end the year at around 5 percent as opposed to the 2.4 percent we forecast prior to the invasion, and the effects of the drop in households’ spending power and power rationing in Europe would push the euro-zone into recession. It now looks increasingly likely that some form of sanctions will be imposed on Russia’s energy exports,” said the company in its latest report.
The company experts believe that this would severely reduce and disrupt energy supply on a global scale and already-high commodity prices would rise.
“Prices could soar further into uncharted territory in the immediate aftermath of a sanctions announcement. But, in the following weeks, we suspect that Brent would settle at around $160pb and that the price of European natural gas could be close to €300 per MWh. What’s more, energy prices would stay high for longer as it would take time for supply to pick up to fill the shortfall. So, Brent oil could end the year at $120pb and EU natural gas at €150/MWh,” the report reads.
Capital Economics notes that as Russia is a large supplier of energy to European industry, a collapse in Russian energy trade would precipitate power rationing in parts of Europe, which in turn would rupture supply chains and could stoke additional inflationary pressure globally.
“Higher energy prices would also boost the prices of agricultural commodities and industrial metals. Non-energy commodity prices haven’t had a strong passthrough to consumer prices in advanced economies in the past, but they could have some additional inflationary effect,” the report says.
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