THE IMPACT OF RUSSIA'S OIL AND GAS EXPORTS ON GLOBAL FUEL PRICES

In recent days, the continuous rise in gasoline and gas prices has had a significant impact on the lives of people and businesses both domestically and internationally. As of March 14, 2022, gasoline prices have been adjusted 7 times and have reached a peak of 30,000 VND/liter. The sharp increase in oil, gasoline, and gas prices is a strong factor affecting businesses and the Vietnamese economy in particular and the global economy in general.

PREDICTED REASONS FOR THE RISE IN GAS, OIL, AND FUEL PRICES:

The political conflict between Russia and Ukraine is escalating. Although negotiations between the two countries have been held, the military situation between the two sides remains tense. Political tension in Eastern Europe has pushed global oil prices up to $105 per barrel - the highest level since 2014. Notably, on March 5, 2022, RT News (Russia) (local time) announced: "The Yamal-Europe pipeline has stopped all gas supplies to the West, meaning the flow from Russia to Germany has been suspended indefinitely." This "century-old valve closure" has caused difficulties for European countries in particular and the world in general in finding alternative supplies, as Moscow supplies nearly 40% of Europe's gas needs through this pipeline. The cessation of supply could lead to a surge in gas prices in Europe. As oil and gas prices rise, the world must also address the problem of rising costs in other areas, such as transportation costs, raw materials, and goods.

The global oil supply shortage is also one of the reasons for the sharp rise in oil prices. The Organization of the Petroleum Exporting Countries and its allies (OPEC+) have pledged to increase supply by 400,000 barrels per day, but the increase only reached 150,000 barrels per day by the end of January. According to the International Energy Agency (IEA), by the end of January 2022, crude oil reserves of 38 member countries of the Organization for Economic Co-operation and Development (OECD) were only about 2.7 billion barrels, the lowest in the past seven years.

RISING FUEL AND GAS PRICES - PRESSURE ON INFLATION AND CONSUMER PRODUCTION

Post-Covid 19, the demand for oil has surged as economies reopen and recover. Many countries are easing restrictions and resuming economic activities, particularly in manufacturing, transportation, tourism, and aviation. However, the sharp rise in oil and gas prices could hinder economic recovery and cause stagnation. This is because rising global oil and gas prices will increase the cost of imported and domestic raw materials. In the production of goods and services, most industries, regardless of their production processes, use fuel and gas to some extent.

Some industries are particularly affected, such as maritime transportation and fishing. Therefore, in addition to directly increasing product costs, rising fuel and gas prices also increase the price of goods in circulation, putting pressure on inflation, reducing the competitiveness of domestic services and goods, and having a negative impact across the board.

Other industries, such as manufacturing and farming, are also significantly impacted by rising oil and gas prices as they rely on fuel and gas to operate machinery.

The global economy is starting to accelerate after a long battle with Covid-19, but the war situation and oil and gas prices are making the race more bumpy and challenging.

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