Opinion: Banning Russian oil exports might hurt Europe far more than the U.S. or Russia - and Vladimir Putin knows that - The Globe and Mail | Canada News Media
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Opinion: Banning Russian oil exports might hurt Europe far more than the U.S. or Russia – and Vladimir Putin knows that – The Globe and Mail

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3 years ago

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The shadow of a worker next to a logo of Russia’s Rosneft oil company, in Nefteyugansk, Russia, on Aug. 4, 2016.Sergei Karpukhin/Reuters

Just under two years ago, when the global economy was pretty much shut down in the panicky first wave of the pandemic, oil prices actually went below zero. On Monday, they shot north of US$130 a barrel and almost hit US$140 at one point.

Natural gas prices rallied by 30 per cent, reaching an all-time high. According to Bloomberg, the benchmark Dutch wholesale price reached US$470 a barrel oil equivalent. That is not a typo.

The latest price driver?

Over the weekend, U.S. Secretary of State Antony Blinken, who was on a whirlwind tour of NATO countries in Eastern Europe, told the media that the White House was in “very active discussions” with European allies about banning Russian oil exports to the United States and Europe. An oil export ban has bipartisan support in the U.S. Congress.

His admission put the energy markets into near panic. While many energy strategists and analysts suspected that soaring prices were inevitable as the war in Ukraine war entered an ugly phase dominated by the bombardment of cities, others thought that prices would not explode because Western governments would be forever reluctant to ban a crucial source of energy: Russia is the world’s third-largest energy producer.

You can’t blame the doubters. As recently as last Thursday, the White House was playing down the likelihood of slapping an oil-export ban on Russia. And Europe, which has few domestic reserves of oil and natural gas, was resisting a ban. Russian energy exports had been exempt from sanctions, still are – but for how much longer?

In recent days, the moral argument to ban oil, and possibly gas, exports began to displace the economic argument to keep Russian exports untouched to protect families and business from a price shock. That position became increasingly untenable because energy exports are financing Russia’s war in Ukraine, to the point of cringing moral absurdity: as energy prices rose, Russia earned more export revenue to pay for its destruction of Ukraine.

Ukraine’s Foreign Minister, Dmytro Kuleba, summed it up succinctly when he said Russian oil “smells of Ukrainian blood.”

A US$10 increase in oil prices boosts Russia’s current account inflow by about US$20-billion a year. For Russia, war had never been so profitable. Oil of the Brent crude variety is now up 80 per cent in a year – gas far more – and energy accounts for about half of Russian exports. Now you know why Kremlin dwellers are smiling, or were until Mr. Blinken said that sanctions on Russian oil might be coming.

The question is whether an oil, and possibly a gas, export ban would hurt the West as much as Russia. What we know already is that the pain on Europe would greatly exceed the pain on the United States and Canada.

Thanks to the shale oil boom, the United States is a net exporter of crude oil and oil products (that is, it exports more than it imports), though not by a large amount. Since Russian crude oil imports are about 3 per cent of total American oil imports, banning them would hurt Americans only a bit.

Europe is not so blessed with homegrown supplies, which explains its reluctance to go whole hog on an import ban. According to the International Energy Agency, about 60 per cent of Russian oil exports go to Europe, and those exports account for a third of Europe’s oil demand (in November, Europe imported 4.5-million barrels a day of oil and oil products from Russia).

Europe is overly dependent on Russian gas, too, and the prospect of European gas shortages has put the gas markets into a tizzy. Royal Bank Capital Markets said Monday that gas futures for delivery in Europe or Britain were trading at 20 times to their U.S. equivalents. The enormous transatlantic price differential was not just a short-term phenomenon. One year out, European price futures were trading at five times higher than U.S. gas futures.

So Europe will enter the house of pain if Russian oil or gas exports are curtailed, let alone banned. The United States, not so much. Europe might even go into recession, since more often than not, soaring energy prices have preceded recessions. Certainly, inflation will remain high.

What about Russia?

There is no doubt a North American and European export ban would hurt. Already, the Russian energy markets are in trouble even though energy remains exempt from sanctions. According to Energy Intelligence, Russian oil exports had fallen by a third or more by last week even though Russian crude sells at a significant discount to Brent crude. Banking sanctions are behind the sharp downturn, plus the country’s pariah status. If non-Russian oil can be found, it will be bought.

To be sure, a European oil embargo would really hurt Russia – if it comes. Europe is so highly dependent on Russian oil and gas and a full import ban seems unlikely, perhaps even economically impossible. For Europe, the ugly reality is that many big European countries, especially Germany and Italy, slept-walked into creating economies that became ever more dependent on Russian energy exports, to the point Germany is shutting its nuclear reactors.

Yes an oil export ban will hurt Russia, but it will hurt Europe even more. Mr. Putin knows this.

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Roots sees room for expansion in activewear, reports $5.2M Q2 loss and sales drop

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2 days ago

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September 13, 2024

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TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.

The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.

“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.

The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.

But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.

Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.

“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.

“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”

Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.

The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.

In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.

Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.

The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.

The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.

Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.

Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.

It will also re-evaluate its design ranks.

Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.

Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.

This report by The Canadian Press was first published Sept. 13, 2024.

Companies in this story: (TSX:ROOT)

The Canadian Press. All rights reserved.

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Talks on today over HandyDART strike affecting vulnerable people in Metro Vancouver

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3 days ago

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September 12, 2024

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VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.

No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.

About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.

Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.

Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.

A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”

This report by The Canadian Press was first published Sept. 12, 2024.

The Canadian Press. All rights reserved.

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Transat AT reports $39.9M Q3 loss compared with $57.3M profit a year earlier

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3 days ago

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September 12, 2024

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MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.

The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.

The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.

Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.

On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.

Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.

This report by The Canadian Press was first published Sept. 12, 2024.

Companies in this story: (TSX:TRZ)

The Canadian Press. All rights reserved.

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