I identified the likely challenges facing Russian oil production at the outset of the Russian invasion of Ukraine – chief among them Moscow’s inability to keep oil flowing in the absence of foreign investment and tech, but also buyers.
Without customers to send crude to, there’s little incentive for the Russians to pump it out of the ground in the first place. This was something I had originally anticipated happening 2-3 months into the conflict.
But the international community, especially the Europeans, have moved harder and faster than I had thought. Between a mix of bans on Russian energy imports, insurers wary of dealing with Moscow, sanctions on Russian banks, and a significant amount of tanker crews, port workers, and collective voluntary boycotting of Russian crude, Russia’s worst-case scenario seems to be already unfolding.
A handful of refineries across Russia have already announced reductions in output due to a lack of demand. This is not good news. If refineries don’t have customers, the oil fields and pipelines that supply them don’t, either. Ditto for storage. Which means oil stays in the ground. And pipelines lay idle. For a Russia without foreign investment, foreign oil services firms, foreign technology, and foreign buyers, the future looks bleak indeed.
At the beginning of the COVID pandemic, we asked our readers who were so inclined and able to consider donating toward a cause we thought was important: Feeding America.
While we still believe strongly in their mission, with recent events in Ukraine we are asking our subscribers to consider supporting a charity focused on relief efforts there. There are many good ones to choose from, but one in particular we are supporting is the Afya Foundation.
They collect money and health supplies for underserved communities in the world, and have begun delivering non-combat support to refugees and population centers in Ukraine. We hope that those who can, join us.