The growing tension between Russia and Ukraine is already having economic consequences worldwide.
This Tuesday, the price of oil reached its maximum value in seven years for fear that the crisis will interrupt global supply. The barrel of Brent, an international reference, reached the $99.38.
The increase is due, among other reasons, to the sanctions United States, United Kingdom and the European Union they are imposing on Russia and that could affect the supply of crude oil from this country.
Russia is a key player in oil production: it is the second largest exporter after Saudi Arabia.
“Russia distributes one out of every ten barrels of oil consumed worldwide (…). It can really hurt consumers at gas stations,” he explains to the BBC Mike Curriechief investment officer of Fidelity International and columnist for the Financial Times.
The sanctions are intensifying after this Monday the Russian president, Vladimir Putindecided to recognize two rebel areas in eastern Ukraine —Donetsk and Luhansk— as “independent republics”.
Western powers fear that this declaration opens the way for Russian troops to officially enter eastern Ukraine, a country surrounded for weeks by some 190,000 Russian soldiers and heavy artillery.
Among the possible measures, the West could also prohibit countries and companies from buying oil from large Russian energy giants, such as Gazprom or Rosneft.
If that were to happen, various experts anticipate that the price of a barrel could easily exceed $100 in the coming days.
But what are the effects of this rise in crude oil prices in Latin America?
oil producers
The increase in the price of oil threatens to further increase the “economic slowdown” that is being experienced in much of the world after the pandemic.
And Latin America is no exception: several countries in the region are already seeing serious hits to their growth prospects and rising inflation.
“A higher oil price is going to have implications on both the supply and demand sides. There are very limited shipments of Russian crude to the Latin American region, but obviously any disruption in the global supply has an impact on the rest of the crudes”, he explains to BBC World ixchel castro, Manager for Latin America of Petroleum and Refining Markets of the consulting firm Wood-Mackenzie.
But what about the countries that are oil producers?
That the price of oil rises is not necessarily good news for all Latin American crude producers.
Brazil and Mexico are the main producers on the continent, while Venezuela, Ecuador, Colombia and Argentina they also produce, although to a lesser extent.
“For them, it’s good that the price goes up, but in reality it’s not that good,” he tells BBC World Ferdinand Valleysenior oil and gas analyst at Bloomberg Intelligence in New York.
“Because, although it is not positive to have a very low price, when it rises above US$80 a barrel it is a very big problem, because of the consumer price inflation”.
“As much as state companies like Petrobras (Brazil) or Pemex (Mexico) have more money, it is not enough to be able to reduce the impact on the consumer. And for governments it is very important that prices do not rise so much, ”he adds.
Given the above, it is important to bear in mind that many producing countries also need to import gasoline. This is the case of Mexico, which is forced to import gasoline from the United States, because it does not have the necessary refining capacity to supply its internal demand.
“The region still has the raw material, but not the refinery capacity it needs to supply its domestic demand. And, therefore, it continues to matter,” explains Castro.
Thus, the rise in the barrel can have mixed effects.
But, looking to the future, Ixchel Castro believes that the fact that today there are prices close to US$100 per barrel is an acknowledgment that the world still needs raw.
“And there the great advantage is that, if we look at the areas of growth in crude oil supply at a global level, Latin America is positioned as one of the most important regions in the next two decades,” he says.
Thus, he adds, any energy transition “should be accompanied by discoveries of new deposits and production.” And in that, Latin America could benefit.
And what about importing countries?
On the other hand, the rise in the price of a barrel is a negative phenomenon for countries that are only importers, as is the case of Chile or Peru.
“It’s a problem because everything is more expensive,” says Fernando Valle.
“Energy is the basis for everything; so when you raise that price, the price of exports also rises,” he adds.
As the English consulting firm Capital Economics warned a few days ago, this could generate a greater tightening of monetary policy in these countries and lead to significant inflation.
“A good part of our countries in the region are still importers of crude oil and are going to see an impact of higher prices for their consumers,” says Ixchel Castro.
“A sustained impact on these prices, without any type of government intervention, can impact not only the price of fuel, but the entire value chain, which is food, raw materials, etc.”, he adds.
The expert assures that this can delay the recovery of the post-pandemic economy and the return to operation of the productive chains that have been affected in the last two years.
Source: Eluniverso
Paul is a talented author and journalist with a passion for entertainment and general news. He currently works as a writer at the 247 News Agency, where he has established herself as a respected voice in the industry.
