RE: 3 crude oil auctions30 Dec 2022 06:45
Could it be cheap russian oil Bugsy ?
Why did Georgia switch to Russian oil?
December 28, 2022 at 8:53 pm
Despite the start of a full-scale war against Ukraine by the Russian Federation, the economic ties between Georgia and Russia are deepening more and more. In January-October of this year, the trade turnover increased by 50%, namely to 1.94 billion dollars.
The largest share in the total volume of imports of Russian resources comes from gasoline and diesel, in particular, in January-October oil products worth 495 million dollars entered Georgia from Russia, which is 375% more than the previous year's data.
In total, in January-October, oil and oil products worth 1.13 billion dollars were imported into Georgia, almost 43% of which came from Russian oil.
As for the period immediately after the start of the war, in March-October, oil worth 973 million dollars entered Georgia from abroad, and 48% of the volume comes from Russian oil. For comparison, at the beginning of the year, the share of Russian oil in the total volume of imports was 16%.
It is significant that in the past Georgia used to buy the largest part of oil from Romania and Bulgaria, but this year the situation has changed dramatically.
The sharp increase in demand for Russian oil is due to a simple reason - it is currently traded at the cheapest price on the international exchange.
The fact is that Russian Urals oil is traded 20-25% cheaper on the exchange than Brent. According to current data, the average price of a barrel of Brent is 87 dollars, the price of WTI Crude is within 80 dollars, and the price of Russian Urals is 70 dollars.
Observation of historical data shows that the price difference between Urals and Brent per barrel was traditionally in the range of 1-2 dollars, however, after the start of the war, this range increased to 20-35 dollars, which indicates that Russian oil is sold at a kind of discount on the international market.
As you know, the prices on the energy market are determined by demand-supply factors, and in this case, the variable factor is the demand, which is sharply decreasing for Russian oil in the West, while the price for Urals is decreasing, if the supply remains unchanged.
The decrease in the demand for Russian oil in the West is due to a number of factors, but the most important among them are the European Union sanctions. According to the decision of the member states, with the sixth package of sanctions, a partial embargo was imposed on Russian oil, which will completely limit the import of Russian oil by tankers by the end of the year, and in 2023, the restriction will also be extended to pipelines and oil products. In addition, the "Big Seven" countries are currently working on an initiative to impose a price limit on Russian oil.
Despite all this, it should be emphasized that Russian oil is not an internationally sanctioned product, which is why the demand for it in China, India and, among others, Georgia
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