There is a place to fall: what will 2023 be like for the Russian economy

Alexey Gromov, Principal Director on Energy Studies of the Institute for Energy and Finance, commented on the Russian oil and gas industry prospects in 2023 to the Profile business magazine.

Will oil hit the ceiling

"It seems that we are going through a stage of a sharp increase in discounts on Russian oil, similar to the one that was in relation to our coal after the introduction of the European coal embargo in August last year," Alexey Gromov commented.

It should be noted that $37-40 per barrel is the price at which oil is shipped in Russian ports. Add to this the cost of freight and insurance and get the final price for buyers in India or China. And both of these components (freight and insurance) are now much more expensive. Thus, the freight cost of oil tankers delivering cargo from the ports of the Black Sea basin has increased by more than 1.5 times compared to November 2022.

"As the business is reconfigured to work in new conditions, the cost of freight and insurance will decrease," Alexey Gromov believes. – Most likely, starting from the second quarter of this year, Urals prices will begin to recover and will approach the price ceiling."

And here we have another problem: Washington promised to revise the price limit for Russian oil every two months. The Institute for Energy and Finance is almost sure that very soon the level of the notorious ceiling will drop. Of course, Moscow will insist that its partners buy hydrocarbons without reference to any ceilings. But it seems that there are no effective tools at the disposal of Russia at the moment to force this.

It is possible that instruments of influence on partners will appear when we are able to build new logistics schemes that will be completely invulnerable to Western sanctions, Gromov believes, but this is not a matter of one or two months, but at least a year and a half.