Ukraine-Russia tensions and the energy industry

Supply disruption due to Ukraine-Russia crisis

While the industry is still in flux and things are changing very rapidly, the current situation is looking quite dire indeed. The price of Brent crude oil has now reached a 7 year high of £73 per barrel. The RAC warned that the crisis may propel petrol prices further beyond the 149.12p record high which was reached on Sunday 19th February. Russia has sent forward troops into the Ukrainian regions of Luhansk and Donetsk known for their hydrocarbon production (Oil, Natural gas and coal),this is set to cause a significant disruption in the supply chain as it is.

However, this is not the only factor that worries the RAC, it is the fact that Russia is one of Europe’s largest exporters of Hydrocarbons. A war on the doorstep of Europe is undoubtedly not going to affect just oil prices, but indeed energy prices which are already in a bad situation currently.

Exacerbated energy crisis

Following escalation of tensions with Ukraine by Russia, many political analysts are suggesting that Russia will begin a possible deadly full-scale invasion of Ukraine. Many in the EU and NATO have expressed that they will go ahead and deliver severe sanctions on Russia if the scenario comes to fruition.

How this will affect the energy industry (and by extension the property industry) is due to the nature of the sanctions that are on the table some of which may have been utilised at the time of writing this article, a banning of Russia from ‘SWIFT’ the world banking system as well as a shut down of the Nord Stream 2 pipeline and decreased trade relations overall with Russia. A shortage of natural gas will lead to increased energy prices across Europe.

Predictions of the property market

Due to the rise in energy prices, this will add to the cost of living crisis in the UK, Many, though not all landlords often hold properties through a Buy-to-let mortgage, the effect of higher energy costs/running costs of their properties will lead them to list the properties at greater rental prices in order to make up the shortfall.

This means increased prices across the board, with higher rental prices the value of the property itself is bound to increase. Many in the media claim that the opposite is true, that due to the increased cost of living, people will simply be unable to afford a wider selection of properties to stay in. This claim however, falls on its face as the demand for property will still be the same, if not higher, a likely outcome is that people will simply take on more debt in order to stay in/purchase properties.

Taking all this information into account, we advise our readers to purchase any property that dips in price due to panic selling to maximise short term profits, alternatively buy what properties you can at this moment in time to maximise long term profits, as there is no telling exactly when the price will skyrocket, however we can be certain that it will.