“With the embargo and the implementation of flow reorganizations, there is a strong risk that there will be a further increase”, estimated Olivier Gantois, president of the French Union of Petroleum Industries (Ufip), on franceinfo Tuesday, May 31. The leaders of the 27 countries of the European Union have agreed to reduce their imports of Russian oil by 90% by the end of 2022. This partial embargo will force Europeans to turn to other sources of supply, such as in Africa and Asia, at the risk of increasing prices.
franceinfo: What is the share of Russian oil in what is sold in France?
Olivier Gantois: The share of crude oil imports from Russia represents between 10 and 15% of French imports.
How will this embargo translate for you?
The challenge for us is to find the equivalent volumes of crude oil elsewhere than in Russia. We have been preparing for this embargo for weeks and we know that we will find volumes mainly in the Middle East and North America. We have to make sure that volumes will be available to us, knowing that afterwards, it’s each importer of crude oil who will eventually have to sign new contracts or renegotiate their purchase contracts. That’s why we need some time to get organized. We will have between six and eight months to organize ourselves before this embargo is fully applied.
What are you going to do in practice?
Sign contracts and reorganize logistics flows. Crude oil coming from the Middle East takes a little longer to arrive on a tanker than if it comes from Russia. The ship is the same but the travel time is longer.
“There are reorganizations to be expected, but I don’t want to worry people since we have started to prepare, there will not be a supply problem.”
Olivier Gantois, Ufipat franceinfo
Will the prices go up?
Yes. They have already climbed since the beginning of the war in Ukraine. The price of crude oil has increased by about $25 per barrel. With the embargo and the implementation of flow reorganizations, there is a strong risk that there will be a further increase. There is a world benchmark for the price of oil, which is Brent. Since the start of the war, Russian oils have been sold at a discount since there are fewer customers to buy them. Conversely, non-Russian petroleum products are sold at an additional price.
The oil market is extremely open, it is supply and demand that determine the price at all times. If you are ready to pay the daily price, you can get supplies without having to organize between European countries. It is a free and liberalized market.
Will production increase?
There will be an increase in production from some producing states, both in the Middle East and in North America. There will also be communicating vessels. Some countries that have not decided on an embargo on Russian oil will have to buy more Russian oil, which will free up volumes from the Middle East that will come to Europe.