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Petróleo Ruso

Can the World Live Without Russian Oil?

Russia exports almost 7 million barrels per day; no country has the capacity to replace this volume of exports

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An awkward meeting took place last Friday between U.S. President Joe Biden and Colombian President Iván Duque, since the day before, Press Secretary Jen Psaki revealed that the U.S. had held talks with the Nicolás Maduro regime in Venezuela.

The meeting between White House officials and members of Maduro’s cabinet took place a week after the announcement of sanctions against Russia, including severe restrictions on its oil industry.

In the last decade relations between Colombia and Venezuela have gradually deteriorated, and the Venezuelan economic meltdown that has left an exodus of millions of refugees fleeing to Colombia, or crossing through it to other countries, has only served to further distance the two States.

For Colombia, the Biden administration’s rapprochement with the Maduro regime represents a national security problem. For years, the dictatorship in Venezuela has financed and sheltered drug trafficking and terrorist groups such as the FARC and ELN (National Liberation Army) in its territory.

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On the border between Colombia and Venezuela, there is a bloody conflict, which month after month leaves dozens of dead people in both countries, due to a war between three or even four sides that has led to the explosion of bombs in the very vicinity of the Colombian army.

A bloody armed conflict rages between the borders of Colombia and Venezuela, Biden’s rapprochement with the Maduro regime caused surprise to the Colombian government. (EFE)

Colombia is politically and commercially much closer to the United States than Venezuela. U.S. trade with Colombia is 10 times the size of what little trade it has left with Venezuela, severely reduced by sanctions on its oil industry during the Trump administration.

Aside from sanctions, Chavismo has taken it upon itself to dismantle its own oil industry. In less than a decade the Venezuelan industry went from producing 3 million barrels per day to barely matching the production of Colombia, which has only a fraction of the proven crude oil reserves compared to Venezuela.



The Colombian oil industry has been a recipient of the exodus of Venezuelan professionals caused by Chavismo. While oil production in Venezuela — the country with the largest number of proven reserves in the world — was plummeting, Colombian production was climbing by leaps and bounds.

Colombia was surprised by the Biden administration’s rapprochement with Venezuela because despite having fewer reserves, the Colombian oil industry is in much better shape than that of Venezuela. However, the issue transcends regional geopolitics for the United States, as the Biden administration is not sure that the world can live without Russian oil.

There’s no turning back, markets won’t see any more Russian oil for the time being

“Basically, we’re going back to the situation that existed before the collapse of the Soviet Union,” explains Josh Spencer, a trader at an oil firm in Houston, “Even if Putin pulls out, which I doubt he will, there’s no going back.”

“Russian oil and gas can’t be easily replaced,” Spencer says. Russia accounts for as much as 14% of the world’s crude oil supply, just over 10 million barrels a day. Although Russian crude oil purchases from the United States barely exceed 2% of imports, and refined oil purchases 9%, the reality is that Europe is highly dependent on oil from the Slavic country, so there is inevitable pressure on the price of a barrel, which has reached over $120 each.


Although some Western companies have stopped their purchases of Russian oil, at present there is no substitute for the Slavic country’s hydrocarbon, so Europe continues to buy Russian crude oil, which is currently being sold with a discount of $20 to $25 per barrel, which has caused the price of a barrel of crude oil to stabilize at $90 in recent days.

The shortage of Russian oil in the market is causing an impact on the price of fuel. (EFE)

“For years now investment in new extraction wells has been at minimums, partly because of the lack of financing towards these projects and environmental laws,” comments Edgar Fernandez director and trader at investment firm Tercio Capital.

“Europe has lost a lot of production capacity, but consumption remains more or less the same. North America, thanks to fracking, was able to greatly increase its production and become practically independent,” says Fernandez.

Neither Venezuela nor Colombia have the capacity to replace Russian oil

“The United States released its crude reserves, but this does not have such a big impact,” says Rodolfo Guzmán, partner at Arthur D. Litlle, who explains that the 60 million barrels released barely cover one day’s consumption in the world.

For Guzmán “the intention of the [Biden] administration is to approach anyone who can supply this oil and add supply to the market”.

Despite the Biden administration’s approach to the Maduro regime, Guzman does not consider it likely that the Venezuelan industry will be able to significantly increase its production: “In the particular case of Venezuela, the country is currently exporting in the order of 700,000 barrels per day, none of that is being bought by the United States because of the issue of sanctions.”

“The Venezuelan industry is very deteriorated, very dismantled,” says Guzman. “Most of the international companies have left the country, and PDVSA has lost a good part of its capacities. Maybe in the short term some volume can be increased, but these are things that are not so easy,” he explains.

The oil industry is disarticulated and barely has the capacity to increase production. (EFE)

In addition to the strictly economic issue, it is unlikely that Venezuela will have any real rapprochement with the United States, as Guzman explains: “After the rapprochement that Biden’s officials had with Maduro, the following day the Vice Minister met with the Russian Foreign Minister.”

Unfortunately for the White House, its Colombian ally has even less capacity to expand, as the Colombian oil industry has no sedentary capacity at the moment, i.e. oil exploitation in the Andean country occur as fast as possible.

“From the point of view of increasing capacity quickly is very low. Last year we closed a production of 736,000 barrels of oil per day, and this year the expectation is to achieve a production of between 760,000 to 780,000 barrels. Colombia does not have a very large surplus oil production capacity,” said Alejandro Castañeda, executive director of the National Association of Generating Companies in Colombia.

The world does not have the capacity to produce more oil in the short term

Colombia’s reality extends to the rest of the world, which has been seeing fuel prices rise more and more, and the lack of Russian oil only exacerbates the situation even more. Venezuela is unable to significantly expand its production, and after the attack on the American consulate in Iraq by Iranian missiles, it is unlikely that the White House will have any rapprochement with Ayatollah Ali Khamenei.

Not even Saudi Arabia could replace Russian oil, since “it would have to increase its daily production by 58% to be able to compensate for Russia not exporting anything,” explains Fernandez of Tercio Capital.

Saudi Arabia has the capacity to release up to 2 million barrels of additional crude oil per day to the market, however, Russia exports 7 million barrels per day. Unless the current situation with Russia can be de-escalated, the world will have to get used to an expensive barrel of oil in the short term and, therefore, to higher inflation in 2022.

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