- The UK is a significant producer of both crude oil and petroleum products, and oil imports from Russia account for eight per cent of total UK oil demand. In addition, the UK imports oil from various countries including the Netherlands, Saudi Arabia, and USA.[1] However, while none of the UK’s petrol is derived from Russian oil imports, 18 per cent of the UK’s diesel demand is sourced from Russia.[2]
- While the UK does not use significant quantities of Russian oil and gas in aggregate,
we were told that increases in global energy prices as a result of sanctions on Russian
production would still be passed on to the prices the UK pays. Dr Amrita Sen, Director of
Research at Energy Aspects, told us that this was because the global oil price “is set by the
marginal buyer, [ ... ] whoever is the last buyer is the price of oil.”[3] She went on to explain
that due to pre-existing supply constraints, combined with new concerns in the market
about whether Russian oil would be sanctioned and therefore unable to reach the market,
prices for oil were rising substantially:
The fundamental point is that we were already headed to $100 oil, even prior to the Russian crisis. What [potential sanctions] have done is to bring more fear into the market about potentially losing Russia, which is one of the biggest producers of oil and gas in the world. Even if China and India continue to buy that oil—there will be some production losses. [ ... ] We just do not have the spare capacity anywhere else—OPEC in particular—to compensate for that Russian loss. That is why we saw oil prices, obviously volatile, go up to almost $140, although they have come back down to $110.[4]
Nathan Piper, Head of Oil and Gas Research at Investec, but speaking in a personal capacity, told us that:
If more stringent sanctions are imposed on Russia and 5 million barrels a day is truly taken out of the market, the oil price really has—not quite no ceiling, but it will rise up a lot before the demand destruction kicks in to maybe bring it back down again. For a consumer through 2022, they need to get ready for what could be continued increases in fuel prices.[5]
- When we asked our witnesses how much petrol and diesel might cost on station forecourts, they said petrol could rise to £2.40 per litre,[6] and diesel could reach £3 per litre.[7] We heard that the price for diesel fuel would rise higher than petrol because, unlike petrol, the UK was not self-sufficient in diesel.[8] Mr Piper told us that:
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Defeating Putin: the development, implementation and impact of economic sanctions on Russia
Economic impact upon the UK
Impact of sanctions on Russian oil and gas
