SCOTTISH businesses have reacted strongly to the news that oil major Shell has bought cheap crude from Russia. Not since the Brent Spar incident has there been such a negative reaction to Shell’s actions.
After enduring a week of “no-bid” markets for Russian seaborne oil, it seemed that sanctions imposed by neighboring governments were driving the price of Russia’s stocks into the ground.
But with Urals Crude Oil now roughly 25% below spot price, the temptation to buy was too great for one company.
Shell bought the Russian stocks from Trafigura Group, who originally sourced the oil from Russia.
This not only confirms the low rate at which Russian oil giants will be forced to sell their stocks, but it also goes to show that there is a clearing price for everything.
Shell’s example may open the flood gates for other unscrupulous companies to follow suit and take advantage of such a deep discount.
Some commentators are relieved by this move, claiming that without Russian oil in the market, the clearing price of crude oil could soon hit $200, with some banks warning that a global recession would be imminent.
Others feel that oil companies, like Shell, who saw profits soar fourteen-fold in the fourth quarter of last year ($16.3bn pre-tax profit), compared with just $1.2bn (£885.5m) in the previous quarter, should foot the bill for the rise in oil prices.
Under a barrage of backlash, Shell released a statement on Twitter in which it stated that the oil was purchased after engaging “in intense talks with governments” adding that they “continue to follow … guidance around the issue of security of supply”, although it is not yet clear which governments the London-based oil giant spoke with.
After insinuating that to not engage with Russian oil suppliers would be tantamount to economic suicide for Western nations, the company announced that profits from its Russian business would be donated to humanitarian aid agencies.
Shell still has a heavy presence in the North Sea, despite recent reports to initiate the sale of its interests in two clusters of gas fields located in the southern part of the UK North Sea.
