EU May Face Energy 'Price Explosion,' Supply Fall Over 8th Sanctions Package, Professor Says

13:37 GMT, 6 October 2022

MOSCOW (Sputnik) - The EU may face energy "price explosion" as it is moving forward with setting price caps on Russian oil, while the restrictions are likely to fail as multiple supply chains will work to circumvent the sanctions leading to a possible derailment of supply, Damien Ernst, professor at the University of Liege in Brussels, said.

Sputnik

"Applying such a price cap is technically very difficult, and frankly I do not expect this measure to work. It is futile: multiple supply chain sales will be set up to circumvent the price caps, the market is always right. Russia refuses this oil price cap, which is understandable, and the risk of a total cut-off for Russian oil deliveries is great," Ernst old Sputnik.

The expert has warned that the situation could "completely derail energy supply in Europe."

"All lights are red for oil prices. They may explode in the coming months!" he added.

Gas and electricity prices had experienced a "period of fever," but the price hike has slightly eased in recent weeks, with petrol trading around 1.6-1.7 euros per liter ($1.58-1.68) at the pump and more expensive diesel at around two euros per liter, Ernst noted.

"It would hurt most European countries anyway, since the price hike affects all deliveries; it is a commodity market. The United Kingdom or Norway would have the slight advantage of being producers as well but the price hike for Europeans, resulting from the price cap imposed by their governments would be felt everywhere in Europe. It will affect the whole European economy," Ernst also said.

A scenario of price surge exceeding 2.5 euros per liter is quite possible, with Europe having to turn to countries which do not approve of the bloc's approach and refuse the idea of price caps, the expert opined.

Earlier in the day, the EU agreed on the eighth package of sanctions against Russia over Moscow's special military operation in Ukraine.

Apart from a price cap on Russian crude, the new package of sanctions also includes economic measures and personal restrictions and provides for the expansion of the ban on import and export of goods such as steel products, machinery, chemicals, plastics, and cigarettes. It also prohibits the sale of civilian firearms, ammunition, spare parts, military vehicles and equipment to Russia as well as the provision of IT, engineering, and legal services to Russian companies and servicing crypto assets of Russian citizens.