UK Living Costs Surge as Russian Oil Ban Looms

Analysts have predicted that Western proposals to prohibit or restrict Russian oil and gas imports will have a negative impact on UK living standards.

Experts predict that as a result of the UK, US, and EU declaring steps to punish Moscow for invading Ukraine, global commodities prices will rise even higher.

The United Kingdom, which receives 8% of its oil from Russia, said on Tuesday that these imports will be phased out by the end of 2022.

However, Russia supplies 18% of diesel, raising concerns about further steep increases in fuel prices for cars and businesses.

Meanwhile, the United States has said that it would immediately ban Russian oil and gas, while the European Union has pledged to reduce its gas imports by two-thirds this year.

The UK’s transition, according to Business Secretary Kwasi Kwarteng, would allow the country’s “market, businesses, and supply chains more than enough time to replace Russian imports.”

Because Russian oil represented such a minor percentage of the UK’s total energy balance, Robert Buckley, an energy expert at Cornwall Insight, told the BBC that the restriction was “mainly symbolic.”

However, he believes that the decision, along with the US embargo and broad boycotts by western firms, would push up already high oil prices in the coming weeks.

Mr Buckley told reporters, “This is a global market, and you’ve got to replace that displaced supply somehow.”

“At the margin, this decision will serve to strengthen already-extremely high oil prices.”

Brent crude, the global oil standard, has been climbing for weeks, reaching a 14-year high of $139 per barrel on Monday. Following the announcement of the penalties, prices increased by 7% on Tuesday.

On Wednesday morning, Brent crude was trading just around $130 per barrel.

Rising wholesale costs are being passed on to consumers in the form of increased gasoline prices at the pump, a trend that the RAC expects to continue.

The RAC’s fuel spokesperson Simon Williamson told the BBC that “we were at £1.56 per litre for petrol and £1.62 for diesel yesterday, both records.”

“In 2016, you could obtain fuel for less than £1 a litre from supermarkets and other low-cost sellers on a regular basis.”

He predicted that prices would stay high as long as the war lasted, while an agreement to release supplies from Iran or Venezuela, both of which are subject to their own oil restrictions, may relieve the burden.

He went on to say, “It’s not just about what customers spend at the pump.” “Everything in our stores is eventually transported by a diesel-powered vehicle, and companies will undoubtedly pass these expenses on to their customers.”

According to the latest Digest of UK Energy Statistics, the major sources of road diesel in 2020 were Russia, the Netherlands, and Saudi Arabia (Dukes). In 2020, the three nations accounted for 62% of global road diesel imports.

The UK is one of the leading importers of diesel in the OECD group of major nations, according to the annual study.

According to the RAC motoring club, diesel is now at a record high of 162.28p per litre on average at the pump.

Even before Russia attacked Ukraine, the cost of living in the United Kingdom was growing at its highest rate in 30 years, owing to increased worldwide demand for oil and gas as economic restrictions were lifted.

However, the conflict has exacerbated the situation, raising the cost of not only gasoline and energy, but also other goods such as wheat and metals.

The EU’s decision on Tuesday to lessen its reliance on Russian gas is likely to affect the UK, according to Nathan Piper, an oil and gas analyst at Investec.

Wholesale gas prices have been rising for months, and analysts predict that when the UK’s energy price cap is reviewed in October, the typical family would pay more than £3,000 per year for gas and electricity.

Mr Piper told reporters, “We are on the verge of a lengthy period of high oil and gas prices, which might last many years.”

“You can’t just remove the world’s second and third largest gas and oil producers out of the supply chain and expect it to have no effect on consumers,” he continued.

He predicted that “severe fuel poverty” will emerge in the coming years, with the government under increasing pressure to provide more assistance.

The Centre for Business and Economic Research (CEBR) warned on Tuesday that a combination of rising commodities and energy prices, as well as sanctions, will have a significant impact on the UK economy.

GDP growth is expected to be more than halved this year, from 4.2 percent to 1.9 percent, according to the report.

Inflation is expected to hit 8.7% in the second quarter of this year, with disposable incomes falling by 4.8 percent in 2022, the greatest reduction since records began in 1955, according to the CEBR.

“This year’s predicted reduction in living standards is anticipated to be £71 billion, or £2,553 per family,” it stated.

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