Russia-Ukraine Peace Deal: Brent Crude Oil Prices Could Fall by $5-$10 a Barrel

The potential lifting of Western sanctions on Russian oil exports following a Russia-Ukraine peace deal could lead to a significant decline in Brent crude oil prices, with estimates ranging from $5 to $10 per barrel. This projection is based on the assumption that a peace deal would boost global oil supply, potentially leading to a decrease in oil prices due to increased competition among oil producers. However, it is essential to note that the European Union has signaled its willingness to keep squeezing Russian energy as much as possible, and U.S. sanctions against Moscow are unlikely to be lifted straight away. Therefore, the impact on global supply and demand dynamics may be limited.

Geopolitical risks and energy security concerns play a significant role in shaping oil prices. The Russia-Ukraine conflict has led to an uncertain global scenario, provoking several Western countries to impose embargos and sanctions on commodity exports from Russia. These actions have exacerbated macroeconomic indicators and disrupted global energy supply chains, leading to unprecedented hikes in prices of energy resources, especially oil and natural gas. The ongoing war between Russia and Ukraine has significantly surged the price of natural gas and curtailed its supply in European countries, as Russian national gas used to account for a substantial share of Europe's natural gas consumption portfolio. Similarly, the Russo-Ukraine turmoil was reasonable for hiking the gasoline prices in the United States of America (USA).

The lifting of Western sanctions on Russian oil exports could potentially boost global oil supply, as Russia is one of the world's largest oil producers. However, the European Union has signaled its willingness to keep squeezing Russian energy as much as possible, and U.S. sanctions against Moscow are unlikely to be lifted straight away. Therefore, the impact on global supply and demand dynamics may be limited. The Russia-Ukraine conflict is assumed to inflict some positive impacts as well. First, it can be argued that the rise in prices of energy due to the ongoing geopolitical tensions between Russia and Ukraine can be a gateway for non-Russian energy-producing firms for amplifying their stock returns. As the global economies would gradually look for sources other than Russia for importing oil and natural gas, not only would the share of non-Russian energy exports in the global energy export figures start increasing but the profitability of the energy firms in those countries can be expected to rise in tandem. Second, in retrospect, the Russia-Ukraine conflict can influence the clean energy transition as a mechanism for lessening fossil fuel dependency and building future resilience against on Russia-Ukraine war-led volatility in fossil fuel prices. Accordingly, in a study by Umar et al. (2022), the authors duly highlighted that the renewable energy market-related returns across Europe have significantly increased from the onset of the Russia-Ukraine war. Consequently, one can expect the Russia-Ukraine conflict sentiments to contribute to the realization of the objectives of SDG 7 concerning the vision of leaving no one behind by ensuring sufficient access to reliable, modern, and clean energy (Küfeoğlu, 2022).

In conclusion, while a Russia-Ukraine peace deal could lead to a decline in Brent crude oil prices, the extent of this decline remains uncertain due to the European Union's willingness to keep squeezing Russian energy and the U.S. sanctions against Moscow. The Russia-Ukraine conflict has had significant impacts on global energy production and consumption levels, making it an interesting field of research from policymaking perspectives about building resilience against unforeseen shocks in supplies and prices of fossil fuels. The Russia-Ukraine war is assumed to inflict some positive impacts as well, such as the rise in prices of energy due to the ongoing geopolitical tensions between Russia and Ukraine can be a gateway for non-Russian energy-producing firms for amplifying their stock returns and the clean energy transition as a mechanism for lessening fossil fuel dependency and building future resilience against on Russia-Ukraine war-led volatility in fossil fuel prices.