Demand for oil is relatively inelastic, meaning that small changes in supply can easily result in large changes in price. Press reports suggest that in the case of the three million or so daily barrels of Russian crude not being delivered to boycotting customers, a large amount is apparently being sold, at a 20% discount to the normal price, to countries like India and China. So, for the moment at least, the actual shortfall may be closer to one million barrels a day, not a catastrophic amount. This is also in line with what has happened during other boycotts.
Russian natural gas is a somewhat different issue. Because natural gas is a gas at the surface, it is sent to market either through a network of pipelines or, if that’s not possible, it’s frozen near the wellhead and transported in cryogenic containers–a very expensive operation to build and maintain. Russia is the largest seller of natural gas to the EU, supplying about 40% of what it uses. The EU asserts that it will cut its dependence on Russian natural gas by a third by the end of the year. Whether/how this will happen is unclear, to me at least.
The hard currency loss to Russia from the oil boycott is the sum of the reduction in volumes, maybe $90 million a day, plus discounts on volumes sold, say $20 million a day. Natural gas is a much bigger deal, amounting on average to about $1 billion daily, weighted toward the winter heating season.
I read something yesterday that suggested the clown-car performance of the Russian military in Ukraine so far is a deliberate ruse to disguise the true objective of the invasion–to seize oil and gas resources in that region, turning Russia into a Euro-Asian equivalent of Saudi Arabia.
I have two problems with this thought: I find it hard to believe the Russian army is just pretending it can’t feed/fuel itself, that its vehicle break down all the time and that it uses the equivalent of vegetable cans tied together with string to communicate with; also, Middle Eastern countries like Saudi Arabia are trying desperately to transform themselves into something (anything!) more relevant than being a hydrocarbon superpower in the renewables age that’s now dawning.
Given that the Russian economy is so dependent on foreign sales of its oil and gas, my guess is that the ultimate result of the invasion of Ukraine will be a sharp acceleration in the world movement toward renewables as the most effective way to defund this former Cold War giant.