Bulgaria, Expensive oil and gas will reduce consumption, which could bring prices down

, SEE Energy News

According to the President of the Balkan and Black Sea Petroleum Association (BBSPA) Valentin Kanev, a price of 129 dollars per barrel of Brent crude oil is very high indeed, and anything above that level will cause a market failure, a decline in consumption, which ought to restore the balance and bring prices down, adding that, if international oil and gas prices remain high for a longer period of time, however, they will affect fuel prices in Bulgaria, pushing the price of petrol above the 1.5 euros/liter mark.

He noted that fuel price fluctuations in Bulgaria occur a couple of weeks after the corresponding price changes on the international market. This week, the price of Brent crude oil exceeded 130 dollars per barrel for the first time since 2008, rising above the peak level of 128 dollars per barrel in 2012.

Kanev noted that oil refineries refrain from buying Russian oil at present because they fear possible EU sanctions. Banks do not support such purchases either. The situation is becoming ever more complicated as the Black Sea region is acquiring the status of a high-risk zone. If the war goes on like it has been going on up until now, prices may skyrocket.

Asked whether energy prices may fall abruptly if the war in Ukraine ends soon, Kanev said that in this case prices should settle, particularly if oil supplies normalize. The Ukraine conflict apart, the world economy is recovering from the effects of the COVID-19 pandemic, which means growing consumption and rising prices.

Discussing the soaring gas prices in Europe, Kanev said the prices have settled at a rather high level. For the time being, Russian gas is being supplied to Europe without any problem. He expects that not all Russian banks will be barred from the SWIFT financial messaging system and sanctions will not be imposed on Russian gas because the consequences would be grave. Asked whether Europe can give up on Russian gas altogether, he said that this is unlikely at present. If total ban on Russian energy imports happens, it will push prices further up because many manufacturing businesses cannot do without gas. According to him, not even gas from Azerbaijan can fill the gap if supplies from Russia are interrupted.

Regarding the upcoming negotiations between Bulgaria and Gazprom Export on the long-term agreement to supply Russian gas to Bulgaria, Kanev said that the Russians will face strong competition in company-to-company negotiations. There are already major suppliers of gas from Azerbaijan. A LNG terminal will certainly be built at the Greek port of Alexandroupoli because the EU has already provided the funds and it will become operational in 2023. The construction of the Greece-Bulgaria gas interconnector is to be completed very soon. So there will be strong competition from now on in the negotiations between companies because diversification is real, which is good, Kanev concluded.