People have been fleeing over the border from Ukraine to Hungary © Janos Kummer/Getty Images
People have been fleeing over the border from Ukraine to Hungary © Janos Kummer/Getty Images

Why buyers won't be able to avoid $120 oil price after Russian invasion

Will Green is news editor of Supply Management
25 February 2022

The price of oil is predicted to hit $120 a barrel in the wake of Russia’s invasion of Ukraine, according to an expert.

George Filis, assistant professor of international economics at the University of Patras in Greece, said energy prices would spike for a period of months but he anticipated they would ease in the summer.

Asked how procurement and supply chain professionals could mitigate higher prices, Filis told Supply Management: “As a company it will be hard to avoid the impact. It’s not going to be easy.”

Prices above $120 a barrel have not been seen since 2014, when Russia invaded Crimea.

Speaking to SM, Filis said while prices would rise, he didn’t anticipate disruption to supplies as a result of the conflict.

“Russia needs to finance the invasion so they need the natural gas to be sold,” he said. “On the other hand the electricity market in Europe is hugely dependent on Russian natural gas.

“I don’t see the Europeans imposing any sanctions in the energy market.”

He said replacing Europe’s reliance on Russian gas with liquefied natural gas imports from the US would result in costs doubling.

Filis did say the supply of agricultural commodities would be hit, with Ukraine being a key exporter.

“We might see some disruption to the supply of some agricultural commodities like wheat. For how long? It depends how long the invasion holds,” he said.

Research and analytics firm The Smart Cube said Russia supplied 40% of European gas and prices between March and May 2022 were expected to increase 18-28% as a result of the conflict. Corn and wheat prices are expected to rise by 10-20%.

Filis said: “Russia and Ukraine are quite wealthy in terms of resources so in any such crisis we definitely anticipate rising prices.”

Experts have recommended buyers prioritise transparency in supply chains to manage disruptions caused by the conflict.

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