The energy crisis mode is on: Latvia prepares fuel reserves just in case

Alexey Gromov, Principal Director on Energy Studies at the Institute for Energy and Finance, commented to Baltnews on the reasons for high prices for oil and oil products in the EU countries, as well as possible mechanisms to reduce them.

The Baltic countries are energy-deficient, and in these states the consequences of the crisis promise to be very unpleasant. On April 19, the Latvian authorities announced an energy crisis in the supply of petroleum products until December 31, 2022.

"The problem of high fuel prices in the Baltic States and in general throughout the EU is that the political decisions of many European leaders to refuse or prepare to abandon Russian hydrocarbons greatly aggravate the situation on the market," Alexey Gromov said.

Today, the leading oil exporting countries in the world cannot increase production volumes. For example, in Libya alone, the figure has recently decreased by 500,000 b/d, which is a third of the total production volume two weeks ago.

"Saudi Arabia is also in no hurry to increase sales of "black gold". Moreover, I would say that the matter is not only in the obligations of the Middle East kingdom to the OPEC + agreements and not even in contradictions with the United States, with which Riyadh has difficult relations. It is quite possible that Saudi Arabia does not physically have the ability to quickly and on a large scale increase production in order to replace Russian oil on the world market," Gromov noted.

"Nigeria, Angola and other oil-producing countries have problems. There is no progress in negotiations between the United States and Iran (a nuclear deal and the lifting of sanctions against Tehran so that it can increase oil sales). As a result, nobody can decrease world oil prices, and today Europe is also discussing the issue of an embargo on the supply of hydrocarbons from Russia. Of course, the EU fuel market will be in a fever," he added.

At the same time, the expert believes that the EU countries still have one tool that can at least partially reduce the prices of gasoline and diesel, but without having to resort to reserves, which is now being said in Latvia and some other countries.

"The EU countries could reduce taxes for producers and wholesale buyers of fuel. This will reduce the costs of companies, which means they will have the opportunity to reduce gasoline prices at gas stations. Another issue is that politicians in the EU do not want to take such a step, since income from such taxes in recent years, as a rule, go to the development and implementation of "green" energy in Europe," Gromov explained.