Ongoing turmoil in Ukraine has once again sparked debate about European energy dependence on Russia. That debate is not new and has been revitalized repeatedly since the first major supply disruption in 2006, which took place after several decades of fairly stable supplies. This new Brookings report, “Business As Usual: European Gas Market Functioning in Times of Turmoil and Increasing Import Dependence,” assesses whether the often expressed desire to move away from using Russian natural gas will in fact happen.
[On Russia, Saudi Arabia and oil prices] This is testing out what prices everyone can live with, and it sounds like the Russians can live with prices slightly lower than what the Saudis want to live with. How durable is this Russia-Saudi agreement? They made it under some serious duress after the price drops from 2014-16, and they didn't have much choice. Do their interests align over the long term? We may begin to see the answer as they begin to chat at the G20.
[On oil prices] The question is whether they want to get crosswise with the Saudis or not. It's not friendly cooperation, especially the Saudis and the Russians. This is definitely more a marriage of convenience than love.
Dollar-denominated oil survived three years of rock-bottom prices and diverging economic fortunes between the United States and the producing countries. It is unlikely to change now that the industry is more flush with cash.