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The Economic and Political Impacts of Disruption to Energy Supply Pathways

Updated on June 30, 2016

Russia has cut the supply of gas through Ukraine, a transit country, on numerous occasions, often due to Ukraine failing to pay billions of pounds of debt, or taking too much gas for itself.

The gas supply was cut for 13 days in 2009, which lead to significantly higher prices throughout Europe, which gets around 1/3 of its natural gas from Russia. Gazprom is the main supplier, and is state-owned, meaning that its activities are heavily influenced by Russian politics.

Russia finished construction of the Nord Stream in 2013; this pipeline passes through the Baltic Sea, far north of Ukraine, thus allowing Russia to exert pressure on Ukraine without disturbing western Europe.

China and India are the second and third largest importers of oil respectively, and much of this oil passes by Somalia, and the Strait of Malacca, if going to eastern Asia from the Middle East and Africa.

The Strait of Malacca and the area surrounding Somalia are both pirate hotspots, with over half of hijackings occurring in Somalian waters. These hijackings often target oil tankers, such as the Sirius Star in 2008, for which a $3 million ransom was paid.

Source

This threat to energy supplies is so great that China, a country with a historical ideology of not intervening in international matters, has deployed naval ships in the area, albeit to protect its own supply routes.

The 1973 oil embargo was caused by American arms supplies to Israel, following the Yom Kippur war. It resulted in the price of oil quadrupling within a year, which had massive economic impacts on the majority of citizens in oil-importing countries.

The disruption to major oil supply routes to western nations, enforced by OPEC, caused rapid increases in the price of petrol, thus transportation, and therefore entire infrastructures, were restrained.

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    • Lipnancy profile image

      Nancy Yager 

      2 years ago from Hamburg, New York

      It is really sad because the only ones who really suffer are the average Joe's just trying to get to work or heat their homes.

    • lions44 profile image

      CJ Kelly 

      2 years ago from Auburn, WA

      It's always surprised me why Western Europe has to purchase so much natural gas from Russia. They would be in much better position diplomatically and militarily if they were not so dependent on Putin.

      There might be other issues involved. Is there not enough supply in and around Western Europe? Cost prohibitive? Trade deal with Russia?

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