Russia’s invasion of Ukraine and the resulting international backlash has plunged energy markets into chaos, threatening dire economic consequences that rival those of the 1970s oil shocks. | Fin24
Bloomberg’s gauge of raw materials was set for its biggest weekly gain since at least 1960 as sanctions on Russia scared off buyers. Coal racked up an unprecedented 80% rally, European natural gas broke price records and oil futures swung in the “You don’t shut down the second-largest commodity producer in the world and not expect bad things to happen,” said Jeff Currie, head of commodities research at Goldman Sachs Group Inc.
It’s not just energy. Wheat jumped to the highest level since 2008, above 400 euros a ton in Paris, as the Ukraine war cut off about a quarter of the world’s exports. Aluminum hit a record above $3,800 a ton on the London Metal Exchange and copper closed in on its all-time high. “The economy disintegrated, production and exports went to zero, expertise fled,” said Currie. For four decades since the revolution, Iran’s oil output has averaged about half the level of 6 million barrels a day achieved in the mid-70s, according to data compiled by Bloomberg.
Yet even that could still be eclipsed by the scale of supply losses from Russia if the war in Ukraine keeps escalating. For other forms of energy there are even fewer options. The European Union, which gets about 40% of its natural gas from Russia, could reduce those imports , according to the IEA. But it would take a year and require major government interventions into people’s everyday lives, such as asking households to turn down their thermostats and replace their gas boiler with an electric heat pump.
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