Shell announced Tuesday that it would no longer buy Russian oil. This was after Ukrainian officials criticised Shell for purchasing crude oil from Moscow. They also demanded that all multinational corporations cut ties with Russia in the wake of the war.
This move was made hours before the U.S. The U.S. and British governments had already banned Russian oil imports. Because of its heavy dependence on Russian oil and natural gases and concerns about global energy supply disruptions, the European Union has been cautious. Global markets have been affected by the turmoil, with oil prices jumping to $139 per barrel overnight, a new high for the region after 14 years.
Shell, a London-based company, stated that it would immediately cease buying Russian oil on spot market. This is used for short-term deals and rapid delivery. It would also not renew long-term contracts. Shell intends to withdraw completely from the Russian oil, natural gas, and oil products market in a “phased fashion.”
CEO Ben van Beurden stated that he was acutely aware of the fact that his decision to buy a cargo of Russian crude oil for refinement into petrol and diesel, despite having security of supply at the forefront of his thinking, was not right.
Shell stated that any profits it makes from the “limited, remaining quantities of Russian oil” will be donated to a fund for humanitarian relief for Ukrainians. It also stated that it will close its Russian service stations and aviation fuels businesses.
David Elmes, an ex-executive in the energy industry and professor at Warwick Business School, UK, stated that Shell might have difficulty ensuring it doesn’t buy Russian oil, as shipments of Russian oil are often sold multiple times, mixed with other products, and then finally reach a refinery.
Elmes stated that Shell faces a challenge in how to separate from a global marketplace — from one participant.
According to Shell’s annual report, it received about 5% of its oil from Russia and 4% of natural gas in 2020.
It announced that it would stop buying Russian energy a week ago, after saying it was “shocked” by the deaths in Ukraine and would also end joint ventures with Gazprom (a huge Russian oil and gas company).
Soon after, Dmytro Kuleba, the Ukrainian Foreign Minister, stated that Shell had “discreetly purchased a shipment” of Russian oil. Shell was forced to respond on Twitter after he posted the news.
Kuleba asked, “Does Russian oil smell like Ukrainian blood?”
Ukraine and its supporters called for countries to cease buying Russian oil in order to reduce funding for its military. There is a tradeoff Russia is the second largest oil producer in the world. This could lead to consumers facing increased prices for everything , including food and electricity due to low energy supplies elsewhere.
Oil was trading at $90 per barrel a month ago. Oil prices are now at $120 per barrel, as buyers have stopped buying Russian crude oil. Many refiners worry that sanctions may be imposed in future. They fear that they will be left with stocks they cannot resell if sanctions are imposed in the future.
Van Beurden stated that Shell’s actions have been guided by discussions between different governments regarding the need to reduce Western dependence on Russian oil and gas while maintaining energy supplies to businesses and consumers.
After receiving government guidance, the company decided to stop buying Russian oil. Officials from the European Union presented Tuesday proposals to reduce reliance on Russian natural gases by two thirds by the end the year. This includes purchasing natural gas from other sources.
Van Beurden stated that these societal issues highlight the dilemma between placing pressure on Russia over its atrocities and ensuring stable and secure energy supplies throughout Europe. “But ultimately, it’s up to governments to make the difficult tradeoffs during the war in Ukraine.”