Fears of a cutoff of Russian supplies as a result of the invasion of Ukraine caused energy prices to surge Monday.
The price of oil briefly spiked as high as $138 a barrel before it settled at $127 a barrel, the highest since 2008. The Dutch TTF exchange's natural gas futures are comparable to the price of oil at over $500 a barrel.
Russia is central to a wide range of agricultural products and minerals, so the move into Ukraine is likely to have long-term implications for commodities markets. Grains like wheat and aluminum have been on the rise.
In addition, as analysts at Citigroup wrote recently, this geopolitical turmoil is occurring at a time when many nations have committed to using fossil fuels for at least 30 years in order to tackle climate change.
The stock market was in turmoil Monday. Europe's main indexes were lower, with the DAX in Germany down 3 percent and the Stoxx Europe 600 losing 2.2 percent, as share prices in Asia fell sharply. The S&P 500 was expected to fall when trading started.
The latest spike in energy prices appears to have been spurred by an effort to embargo Russian energy exports as punishment for the country's war against Ukraine. The Secretary of State added to expectations that there would be an embargo on Russian oil during his recent tour of countries near Ukraine.
We are in active discussions with our European partners about banning the import of Russian oil to our countries while maintaining a steady global supply of oil, Mr. Blinken said Sunday.
Major problems for both industrial users and consumers would be created by a drop in oil and natural gas supplies from Russia. According to the International Energy Agency, Russia is one of the world's leading oil producers, accounting for one in 10 barrels produced globally, and about 60 percent of the country's oil exports go to Europe.
Many refineries process Russian oil to find other sources. A refiner cannot always substitute one grade of crude for another, because there are many different grades of oil. Washington's sanctions on Venezuela have led to the United States buying more Russian oil.
On Saturday, Shell, Europe's largest oil company, said that it had bought a cargo of Russian crude oil because alternative sources would not have arrived in time to avoid disruptions to market supply. According to data from the motor club, the average price in California was $5.34 on Monday, up 51 cents in the past week.
Europe is more dependent on natural gas as a fuel than it is on oil, with Russia accounting for one-third of supplies in normal times. Analysts said current prices don't seem sustainable.
It is so expensive that you are going to drive utilities into steep losses, according to a director at the Eurasia Group.
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