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Global oil markets are bracing for more upheaval in the next couple weeks. That's when the European Union will ban all Russian oil products in retaliation for the war in Ukraine. The ban includes diesel fuel, used widely throughout Europe. NPR's Jackie Northam reports.
JACKIE NORTHAM, BYLINE: This will be the second European Union ban targeting Russian energy in the past two months. In December, an all-out ban on Russian crude oil went into effect. This one, due to be implemented this weekend, will apply to anything produced from Russian crude, says Richard Bronze, head of geopolitics at Energy Aspects, a consultancy.
RICHARD BRONZE: The gasoline that goes into a car, the jet fuel that goes into a plane or diesel that goes into trucks, into operating machinery - so it's really the fuel that we actually consume and keeps the economy going.
NORTHAM: Bronze says Europe imports about 750,000 barrels a day of Russian diesel, more than half its total imports. So the ban will have an impact. Europe has been gobbling up diesel ahead of the ban and looking for new suppliers, says Matteo Ilardo with RANE, a global risk intelligence company.
MATTEO ILARDO: Kuwait, for instance, in the Middle East, will increase fivefold its exports of diesel to Europe and twofold the jet fuel exports to Europe. And these diesel flows will also increase a lot from Saudi Arabia but also from Asia, from India a lot, and from the U.S.
NORTHAM: And just as it did with the ban on crude, Russia will have to find new places to sell its refined oil products, says Hedi Grati, head of refining research at S&P Global Commodity Insights, an energy research and data company.
HEDI GRATI: Those could be in East Africa. They could be in Asia. They could be in Latin America. And so what you're looking at is one great, big reshuffle to get desirable barrels to Europe and then barrels deemed undesirable from Russia to those other markets.
NORTHAM: There is a twist. The ban on Russian oil products could boost its sales of crude to China and India. Both can import Russian crude, refine it and send it back to Europe. It's all perfectly legal, says Bronze.
BRONZE: It is being viewed by some critics as a loophole or a weakness. But I think that is a deliberate part of the policy design, and it reflects the usual way that customs treats crude oil versus refined products. Once it's been through a refinery, for customs rules, the oil is viewed as transformed, and then its country of origin becomes wherever that refinery was located.
NORTHAM: Along with the ban, the G-7 will institute a price cap on Russian refined oil products anywhere in the world. That's similar to what happened when crude was banned in December. That means no ships will be insured if they're selling the oil products above a certain price, which hasn't been set yet. Whatever price is decided, Ilardo says there will undoubtedly be turmoil in the global oil markets initially.
ILARDO: We'll have a price spike, definitely in February, right after the ban comes in place. This will be simply a market reaction. Markets don't like uncertainty, so they usually react with price spikes.
NORTHAM: Not good news for consumers or businesses in Europe, which is already struggling with a weakened economy. And oil is a global market, which means there will be an impact in the U.S. as well. The big question is whether this ban, like the other one, will have any impact on Russian President Vladimir Putin in ending the war in Ukraine. I'm Jackie Northam, NPR News.
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