The US and its allies have been cautious about it so far avoid sanctions on Russian oil and gas as it could hamper global economic growth and supply chain recovery in the sector.
Disrupting the flow of energy from Russia would likely push up gas prices, further shake financial markets in an already volatile period of high inflation, and hit consumer wallets.
Despite the lack of direct energy sanctions, the West has made it much harder for Russian companies to ship oil and gas tankers Ban on ships in European ports.
“This is going to be a really big disruption in terms of logistics and people are going to be looking for kegs,” Yergin told CNBC, according to a Thursday report. “This is a supply crisis. It’s a logistics crisis. It’s a payments crisis, and it could well be 1970s proportions.”
This excludes exports from Russia, the second largest oil producer in the world around 8% of the global supply of the world. According to UBS, the country accounts for around 40% of EU gas imports and 30% of oil imports.
NATO members, which receive half of Russia’s exports, are bound to experience disruption, Yergin said. What could help the situation, he says, is solid communication between governments enforcing sanctions.
Experts are already warning that energy assets would suffer the worst fate in the financial markets as a result of the war in Ukraine. JPMorgan estimates Brent crude could End of the year at $185 a barrel, up nearly 70% from the current level of around $110.
“This could be the worst crisis since the Arab oil embargo and Iranian revolution in the 1970s,” Yergin said.
Energy has been a foreign policy instrument of nations since the beginning of international trade in fossil fuels. The Arab oil embargo, with Arab oil producers cutting production by 5% to target the US for supporting Israel, was the first oil crisis to result in large price jumps. the Iranian Revolution of 1979 was the second big.
“What we haven’t seen so far is also the big reputation issue, companies that don’t want to do business with Russia,” Yergin said.
“Vladimir Putinin destroyed in a week what he spent 22 years building, an economy that was basically integrated into the world economy. Now Russia is decoupled from the world economy,” he said.
The economic historian, author of Energy market bestseller “The Price” which earned him a Pulitzer Prize, warned that the crisis was hitting just when the market was already faced with tight supply and limited alternatives.
Crude prices continue to rise as buyers shun Russian crude and OPEC seems more concerned about not angering Russia than responding to the impending crisis.
Oil has been trading at decade highs between $110 and $120 a barrel for the past few days, the highest since 2014.