Sector Overview
2021 saw oil price rises combined with supply challenges due to increased demand following the easing of COVID 19 restrictions. 2022 has, so far, continued in a turbulent and challenging manner with the Russia/Ukraine conflict highlighting Western Europe’s reliance on Russian oil and gas. International sanctions and a desire to reduce Russian dependence have been key drivers behind significant price increases. The US has already implemented a ban on Russian oil imports, with the UK planning on phasing out all imports by the end of 2022. Germany, a country that purchased a quarter of its oil and 40% of its gas from Russia, have announced plans to halve Russian oil consumption by the summer, and reduce to zero by the end of the year; gas is then set to follow. The gas market also remains a challenge in 2022 with record prices reached following a rebounding demand for commodities. In addition to formal government policies and sanctions, companies are facing moral pressures to reduce their involvement with Russia. After posting record profits in 2021, the likes of BP and Shell, have announced they will divest their Russian holdings and cease partnerships.