The new energy shock: Putin, Ukraine and the global economy

The new energy shock: Putin, Ukraine and the global economy

Even before Russian tanks rolled into Ukraine on Thursday, western governments were struggling with rising energy prices that threatened to derail economies emerging from two years of pandemic. Vladimir Putin’s aggression could now turn that threat into a reality.

From crude oil to diesel to natural gas, the fossil fuels that power the global economy are trading at or towards record levels, threatening to redraw geopolitical relations between producers and consumers, drive up inflation and potentially even disrupt the fight against climate change.

On Thursday, Brent crude, the international benchmark, almost hit $106 a barrel, its highest price since 2014, as traders digested the news that the world’s second biggest oil exporter had gone to war with a country at the centre of a web of energy export infrastructure.

European natural gas prices also spiked this week, reflecting fears that Russia could retaliate by withholding exports accounting for about a third of the continent’s gas needs in retaliation for new sanctions and Germany’s decision to indefinitely suspend certification of the Nord Stream 2 pipeline.

Putin, Russia’s president, has not only led Europe into one of its worst conflicts since the second world war, but also worsened an unfolding energy crisis.

“The next stage is an