Russia’s invasion of Ukraine has sparked significant volatility with regard to energy markets, with prices of natural gas soaring in the wake of the assault, and concerns lingering about the supply of gas to Europe.
Oil prices surged past $100 a barrel for the first time since 2014 on Thursday (24 February) after Russian President Vladimir Putin ordered a full-scale military assault on Ukraine, prompting widespread international condemnation.
Energy prices had already been soaring in recent months amid a confluence of factors, including the pandemic, limited supply and growing tensions between Russia and Ukraine.
In the US, which is grappling with its highest inflation since the early 1980s, the average petrol price nationwide is now around $3.52 per gallon , up nearly 90 cents since last year, according to GasBuddy.
Many analysts expect prices to rise much higher still, amid fears of major disruption to the global energy supply.
Significant concerns also remain about energy supplies to Europe, given that Russia currently supplies around 40% of Europe’s gas.
Such concerns have led the EU to seek alternative supplies of gas in recent months, from countries including the United States, Qatar, Azerbaijan, Nigeria, Japan and South Korea.
However, as previously reported, Europe’s energy supply would not be affected if the Nord Stream 2 gas pipeline designed to bring Russian gas to Germany was halted, since the pipeline is not yet operating, the European Commission has said.
“Nord Stream 2 is not yet functioning, is not supplying energy to Europe. It’s not a different source of energy, it’s a different pipeline for an existing supplier… There’s no change in the current situation,” a Commission spokesperson told a press briefing.
German Chancellor Olaf Scholz has halted the certification of the pipeline for the time being after Russia formally recognised two breakaway regions in eastern Ukraine.
Nord Stream 2 is designed to double the amount of gas flowing from Russia straight to Germany, bypassing traditional transit nation Ukraine, on the bed of the Baltic Sea.
Following the invasion of Ukraine, new gas contracts with Russia are inconceivable, the chair of Germany’s foreign affairs committee told broadcaster RTL/ntv.
Michael Roth, a member of Chancellor Olaf Scholz’s Social Democrats, said he can no longer imagine deepening economic relations with Russia: “That has failed. In the end, we have to work faster than planned to make ourselves less dependent on an authoritarian regime.”
Meanwhile, the London marine insurance market had already anticipate the large-scale disruption, adding the Ukrainian and Russian waters around the Black Sea and Sea of Azov to its list of areas deemed high risk last week.
Guidance from the Joint War Committee, which comprises syndicate members from the Lloyd’s Market Association (LMA) and representatives from the London insurance company market, is a significant influence on pricing and conditions for the marine market.