German Minister warns market prices might rise due to EU's oil embargo on Russia

Germany has warned that a ban on Russian oil imports will harm Europe's economy, despite its support for an embargo. The vice-chancellor and economy minister of the country, Robert Habeck, cautioned on May 2 that a ban, which is now being considered by the European Union's 27 members, would raise energy prices for consumers.

According to the Financial Times, Robert Habeck stated, "We will be harming ourselves, that much is clear but there's no way this won't come at a cost to us", adding that Europeans should be prepared to bear the cost in order to help Ukraine.

The German minister said he expects the European Commission to recommend a ban on Russian oil imports, according to German news source ZDF. If it takes such a step, he says, oil prices will definitely rise. To get all member nations to agree, though, Habeck said there would have to be a "clever compromise." Hungary has been especially vociferous in its opposition to the plan, as it is highly reliant on Russian energy.

Germany, a big Russian importer, has altered its stance in recent days, abandoning its opposition to an oil embargo as long as it has the time to prepare. The country's dependency on Russian oil dropped dramatically in the previous month, according to the country's Economy Ministry.

It now imports roughly 12% of its oil from Russia, compared to around one-third in 2021. Germany, on the other hand, said it still gets 35% of its natural gas from the country. Brent crude fell 1.52% to $105.92 a barrel on May 3, as investors weighed concerns about the global economy against the threat of an oil ban. WTI crude fell 1.7% to $103.38 a barrel.

European Union imposes ban on Russian oil

Meanwhile, in a recent development, by the end of the year, the European Union wants to restrict all oil imports from Russia and withdraw Sberbank, the country's largest bank, from the SWIFT international payments network. The measures, according to European Commission President Ursula von der Leyen, would be part of the sixth set of sanctions against Russia for its invasion of Ukraine.

She stated that crude oil supplies would be phased out in six months and refined oil product imports would be phased out by the end of 2022. The proposal's news raised crude oil prices by more than 3.5%, albeit it still needs to be approved by all EU member states. At 7.20 a.m. ET, Brent, the global benchmark, was trading near $109 a barrel, while US oil futures were trading at $106 a barrel.

(With agency inputs, Image: AP)