On Sunday, the European Union enacted its latest embargo against Russia, banning the import of the country’s diesel fuel and other oil products amid their ongoing invasion of Ukraine.
Russia heavily relies on revenue from its oil-and-gas industry; the country is the third-largest oil producer in the world. In 2021 alone, revenue from oil and natural gas made up nearly a half of Russia’s entire federal budget, per the International Energy Agency.
The decision to ban the country’s oil products came after the E.U. and the U.K. banned seaborne imports of Russian crude oil, in December 2022.
That policy alone saw Russia’s month-over-month earnings from fossil fuel exports decrease by almost a fifth in December, the most significant drop since Russia’s large-scale invasion of Ukraine, according to the Centre for Research on Energy and Clean Air.
The E.U. remained the largest importer of oil from Russia, though this is set to change now that the new, more widely encompassing ban is in play. European countries will instead have to look to other sources of refined oil, most likely in the Middle East, India and the U.S.
In the meantime, the Group of Seven—made up of the U.S., Canada, France, Germany, Italy, Japan, and the U.K.—also decided to enact a global price cap of $100 per barrel on premium oil products, like diesel, and $45 per barrel on oil and fuel, to avoid an increase in gas prices that would impact consumers. The G7 agreement bars access to maritime services like shipping, marine insurers, and other services on any ships carrying Russian oil products unless they are purchased at the set price or below, NPR reports.
The U.S. federal government’s other sanctions—including a full block of Russia’s largest financial institution and private bank, a ban on any new investments in Russia by Americans—have effectively limited Russia’s war supply, causing major shortages for semiconductors and a near stop to Russia’s missile production, according to a factsheet from the U.S. Department of State.
“The caps we have just set will now serve a critical role in our global coalition’s work to degrade Russia’s ability to prosecute its illegal war. Combined with our historic sanctions, we are forcing Putin to choose between funding his brutal war or propping up his struggling economy,” U.S. Treasury Secretary Janet Yellen said in a statement Friday.
It’s possible that the E.U.’s embargo will impact fuel prices in the E.U. Indeed, prices for fuel in the U.S. reached a record high of more than $5 a gallon in June due to inflationary pressures, pandemic-related supply chain disruptions, and the war in Ukraine. Increased demand for gasoline as employers transitioned back to in-person work also impacted prices.
Gasoline prices have since declined, with the most recent U.S. Bureau of Labor Statistics report showing a decrease of 1.5% over the last year. This is attributed to a decline in global energy demand, according to the New York Times. And experts told the Associated Press that while there may be a tick in prices as the economy adjusts to the shift, prices should not spike heavily.