Since Russia’s invasion of Ukraine on 24 February, the geopolitical and economic importance of energy has been plain to see. The war has brought higher energy prices, with knock-on effects for the cost of living crisis in the UK and elsewhere.

During the first two weeks of the war, Brent prices – the European oil benchmark – increased by more than 25%. By the end of March, European gas prices were around 580% higher than a year earlier.

While they have fallen back since then, this is in part because many European companies have accommodated Russia’s demands to pay for exports to a non-sanctioned Russian bank to facilitate Gazprom (Russia’s majority state-owned energy company) receiving roubles.

In Europe, the continent’s acute foreign energy dependency has proven divisive. At a summit on 10-11 March, the countries of the European Union (EU) collectively agreed to phase out imports of Russian energy. But where immediate sanctions are concerned, national interests and geopolitical judgements prevail.

Five weeks into the war, the Baltic states suspended purchases of Russian gas. By contrast, over the same weekend, politicians in Berlin took to the TV studios to explain the likely systemic consequences for the EU’s industrial powerhouse of reducing energy supplies from Russia.

Where oil is concerned, the EU has been discussing a sanctions package for some weeks without being able to reach an agreement.

The war-induced energy shock is far from the only disruptive force around energy coursing through the world economy. There are now three different structural shocks at work, each with geopolitical implications.

The first comes from the disturbance that Russia has inflicted on itself. The country is the world’s biggest exporter of natural gas, the second largest crude oil exporter and the third most significant coal exporter.

Around three-quarters of Russia’s gas exports go to Europe and Turkey. Most of this westward-bound gas arrives via pipelines.

To expand imports to Asia to compensate for the European market share that it may lose over the next few years, Russia will have to build a second gas pipeline to China and substantially increase its liquified natural gas (LNG) capacity at Sakhalin 2 on the Okhotsk Sea.

How will this continue in the long term?

he war in Ukraine will result in expensive food and energy for the next three years, the World Bank has warned, intensifying fears that the global economy is heading for a rerun of the weak growth and high inflation of the 1970s.

In a gloomy analysis, the Washington-based development organisation said there was a risk that persistently high commodity costs lasting until the end of 2024 would lead to stagflation – sluggish activity combined with strong cost of living pressures.

The Bank’s latest commodity markets outlook said that over the past two years the world had seen the biggest increase in energy prices since the 1973 oil crisis and the biggest jump in food and fertiliser prices since 2008. While the costs of energy and food were likely to retreat from their current levels, they were forecast still to be above the average for the past five years at the end of 2024.

As a result of trade and production disruptions caused by the Russian invasion of Ukraine, the Bank is forecasting a 50% rise in energy prices this year.

It expects the price of Brent crude oil to average $100 a barrel in 2022, its highest level since 2013 and an increase of more than 40% compared with 2021. Prices are expected to fall back to $92 in 2023 but will remain well above the five-year average of $60 a barrel.

We want to extend our sympathies to anyone who has been caught up in the Ukraine conflict.