Petrol prices have risen to a new high as oil and gas costs rise amid concerns that Russia's invasion of Ukraine would cause a world economic impact.
Oil hit a high of $139 a barrel last month, the highest in nearly 14 years. While the retail price of gas for next-day supply more than doubled.
Following weeks of heightened tensions, Russian President Vladimir Putin ordered Russian soldiers to invade Ukraine, provoking international sanctions against Russia's economy, but not its oil supply or energy payments.
However, when sanctions against Russia got more severe, financial institutions began to refuse to finance Russia-related activities such as obtaining letters of credit or clearing payments, and some corporations became hesitant to buy Russian crude, Brent rose above $110 for the first time since 2014.
The market's attention should be drawn not just to if the oil sector will be immediately attacked by restrictions, but also to the cascade influence of self that will occur throughout the oil supply chain, from advertising to finance to shipping.
Companies have already avoided acquiring Russian barrels because of fears of energy sanctions and the uncertainties surrounding banking sanctions, pushing the price to new historic highs and slashing shock strategies to mitigate such as the SPR releases.
Furthermore, it has become evident that dealers with Russian crude on their books are having difficulty clearing cargoes, as seen by increasing differentials and increased shipping and healthcare premiums.
That was the global implications for the oil market. But there is a country whose oil exportation increases day by day.
And the country is Iran.
Oil climbed 7% in a turbulent day as Western sanctions disrupted Russian deliveries, outweighing promises for increased Iranian supply if Washington and Tehran secure a nuclear deal.
Early in the day, prices rose when Russian troops seized Europe's largest nuclear power plant. A fire in a training building was put out, and officials declared the facility safe.
The rise was continued when the Biden administration announced that it is considering alternatives to reduce US purchases of Russian oil and is studying options to limit the impact on world supplies and consumer costs.
Crude futures have risen by more than 20% since the US and its allies banned Russia for its invasion of Ukraine on February 24.
Russian oil sales have been hampered, with sellers discovering it hard to finish deals despite offering huge discounts on Brent crude.
Brent crude futures jumped $7.65, or 6.9%, to $118.11 per barrel, while US West Texas Medium (WTI) crude rose $8.01, or 7.4%, to $115.68 per barrel last month.
Brent closed at its highest level since February 2013 and WTI at its highest level since September 2008.
It reached its greatest intraday level since May 2012, while WTI reached its highest level since September 2008.
Divided
The global markets are now "divided" between the hazards of Russian expansion in Ukraine and the "increasing potential" of a settlement in the informal talks with Iran and the US in Vienna, according to specialists from the research firm Energy Aspects.
The potential of a second nuclear agreement with Iran now appears to outweigh concerns about oil supply disruptions as a result of the Kremlin coup.
Iran cannot fail to see the implications of price volatility in the context of Russia's invasion of a neighboring state's sovereign land.
"The impact of the battle between Ukraine and Russia" would be felt by the global energy market for a long time, according to Farshad Parvizian of the Iranian Association of Economists.
"Given our country's oil wealth, it will be extremely beneficial to Iran's economy," says the official.
Oil Matters points out that Iran now has up to 80 million barrels of oil on hand. A portion of this volume is stored in tanks near Asian customers and will be sold as soon as possible.
Following the nuclear agreement, Iran might expand domestic manufacturing by 1.2 million barrels per day, saturating the market.
This helps not only the Islamic Nation's economy, which has been hurt by sanctions, but also President Biden's administration, which is trying to make petroleum more affordable.
The writer is a student of the Finance Department at North South University
