Until the Russia-Ukraine War, the European Union (EU) relied on Russia for roughly 39.2% of its natural gas supply.

Today, it's barely receiving any gas or oil from Moscow due to sanctions and the more recent G7 price cap, which went into effect Monday, Dec. 5. The initiative, led by the U.S. Department of the Treasury, prevents Western companies from shipping Russian oil unless it is sold for less than $60 a barrel (barrels are currently priced at $85 under Brent, the international benchmark for crude oil).

Additionally, a group of 23 oil-producing nations, known as OPEC+, have agreed to maintain its existing policy of reducing oil production by 2 million barrels per day.

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Although the EU has filled its gas storage facilities to nearly 94%, many of its nations used Russian gas and oil to fill those reserves, according to Gas Infrastructure Europe. The EU is now on a mission to end its reliance on Russian fossil fuels by 2027.

Hunting for countries that can fulfill the EU's supply needs will likely be difficult. In the first four months of 2022, the U.S. sent nearly three-quarters of all its liquefied natural gas to Europe with daily shipments to the region more than tripling from last year’s average, the U.S. Energy Information Administration (EIA) reported.

Furthermore, the U.S. economy is undergoing an energy supply crunch itself, as the strategic petroleum reserves (SPR) is now around 405 million barrels, or 57% of storage capacity -- levels not seen since 1984. This is down from almost 580 million barrels in February and more than 650 million barrels during the first coronavirus wave in 2020, reported the Energy Information Agency.

According to the EIA, U.S. field production of crude oil is at roughly 12.3 million barrels per day compared to the same period in 2019 of nearly 12.6 million barrels per day.

"Moscow has already made it clear that it will NOT supply oil to those countries who support an anti-market price cap," Mikhail Ulyanov, Russia's permanent representative to International Organizations in Vienna said via Twitter.

There's also the worry that Russia might use evasion tactics, similar to those used by Iran and Venezuela, to continue shipping without complying with the price cap.

Meanwhile, as China loosens its Covid-19 restrictions and begins re-opening locked-down cities such as Shenzhen, it will continue to stockpile Russian crude at a discount. Recall earlier this year when Russia, overtook Saudi Arabia as China’s top supplier for oil.

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