Increases the European squeeze on Russian petroleum products with the risk of repercussions on diesel and petrol prices. 5 February 2023 will start theembargo on importation of processed petroleum products (like diesel) from Russia. A further embargo that follows the December 5th one on crude oil imports by sea established in theeighth package of sanctions. Another shot at the Putin's business which would risk losing around the 160 million euros of revenue per day.
Russian diesel embargo: how much does it matter and what can happen
Europe is preparing to suspend the importation of refined products Russians, approx 1 million barrels per day, half of which by “sweet oil” high calorific (a type of oil so named if it contains less than 0,5% sulfur, compared to a higher level of sulfur in acidic crude oil).
Le consequences of the embargo, however, they risk hit i European citizens who see the danger of a new increase of diesel price.
Europe is promoting the energy transition towards green fuels and has long been submitting the refining activity to stringent environmental constraints. The refining capacity has thus been reduced to move towards greener policies. This has, however, led to a dependence on diesel abroad.
Diesel, however, is still a vital product for the European economy which is used to fuel cars, trucks, ships, industry and agriculture. In the European Union the diesel demand stands around the 6 and 7 million barrels per day: the embargo on Russian products would lead to a drop in 7-8% of the offer. A limit that consumers risk paying with new increases in diesel prices with all the related consequences on transport and the prices of goods traded in the EU. Meanwhile, in Italy, price of diesel has reached 1,9 euros per litre at service stations with the risk of a leap above 2 euros per litre.
Russian diesel embargo: Italy is protected but risks the impact of European demand
After the approval of the eighth package of sanctions against Russia, theEurope she ran for cover buying refined products from India, the Middle East and China but at a higher cost.
THEItaly has a favorable position: it already has stopped his addiction from Russian imports with the solution of the Priolo case. We are thus covered from the direct consequences of the embargo on Russian products. In addition, Italy still has available 13 refineries and for refining it is sufficiently autonomous: domestic consumption of refined products is equal to 55 million tons compared to almost 71 tons refined on site (with a theoretical capacity that can reach 88 million tons).
Il higher risk for the country it could arrive from abroad due to the greater demand from other European countries more exposed than us. Germany, for example, depends 30% on Russian diesel and could move towards Italy to fill the gap, increasing the demand for refined products and thus creating some availability difficulties on the internal market.
It is difficult to say how the markets and EU countries will react to the embargo of Russian refined products: from 5 February the picture will be better understood.
In addition to the embargo, there is also the price cap on Russian oil
The G7 countries and the European Union, in previous months, have also fixed a price cap to Russian oil imported by sea: it can only be traded at a price lower than dollars 60. The roof is applied to sales to third countries. In practice, European companies cannot transact with third countries at a price above the ceiling through insurance and financial services companies.
The economic benefit to buyers is an estimated $160 billion in annual savings for the 50 largest emerging economies, from Africa to Asia according to a US Treasury analysis.
The price cap aims to hit Russia's revenues without destabilizing the market. According to the agreements envisaged, the ceiling on Russian oil must be reviewed periodically and must be at least 5% lower than the average market price of Russian crude oil. A new round of EU discussions on new ceilings and embargoes is expected over the weekend, precisely in view of the deadline of next January 5th.
