The latest round of sanctions on Russia’s energy sector is already rippling through global markets — and on both oil and gas fronts, the cost to consumers and industries looks poised to rise. Earlier this week, the European Union (EU) adopted its 19th sanctions package, which includes, for the first time, a phased ban on Russian liquefied natural gas (LNG) imports.
At the same time, the Vladimir Putin-led Russian government remains defiant as the United States Treasury Department and US sanctions target key Russian oil companies.
Supply shock and price pressure
When major suppliers are hit by sanctions or face higher costs or restrictions in accessing markets and financing, it squeezes available supply. In oil markets, fewer barrels or more expensive exports feed directly into higher global prices. With gas, especially for Europe, the threat isn’t just less volume — it’s greater uncertainty, risk premiums, and the need for buyers to diversify away from a dominant supplier.
The EU’s LNG ban is set to take effect in stages: short-term contracts end after six months, long-term deals by 1 January 2027.
Meanwhile, Russia is seeing its oil export routes and shipping being targeted (including its “shadow fleet” of tankers), which raises transportation, insurance, and logistical costs — all of which are built into end-prices.
Why this matters for global energy prices
- Oil: With fewer Russian exports or at least more costly ones, global spare capacity shrinks, so crude prices are pushed upward. Higher crude means higher costs for gasoline, diesel and jet fuel.
- Gas: Even if volumes don’t collapse immediately, the fact that Europe is signalling a phasing-out of Russian gas contracts creates uncertainty. Buyers may bid up prices in futures or long-term contracts to lock in supply. One recent report noted Russia was warning – via Putin – that these sanctions could spike global oil prices.
- Knock-on effects: Energy is a foundational cost. When it rises, everything from manufacturing to transport to heating gets more expensive. Inflationary pressures build. If businesses face higher bills, many will pass those on. Households feel it in utility bills, fuel costs, heating.
The “Russia says it won’t hurt” narrative
Putin has dismissed the sanctions as “unfriendly acts” but claimed Russia’s economy will withstand them.
Analysts aren’t so sure. The real question is how much of Russia’s export capability is effectively curtailed (or becomes much more costly) and how quickly buyers and markets adjust. If Russia manages to reroute or find alternate buyers at similar volumes, the impact is smaller. But if material volumes are constrained, then we’re looking at sustained upward pressure on energy prices.
What this means for UK businesses
Even though the UK no longer imports significant volumes of Russian oil and gas, its businesses are still deeply exposed to global energy markets. When crude and gas prices rise internationally, UK firms feel the knock-on effects through higher operating costs, tighter margins, and reduced competitiveness.
- Rising input and transport costs: Manufacturing, logistics, and construction firms are among the first to feel the impact. Higher diesel, shipping, and aviation fuel prices raise costs across supply chains, affecting everything from raw material delivery to final product distribution.
- Energy-intensive sectors under strain: Industries such as chemicals, steel, glass, and food processing — which rely heavily on gas and electricity — face a particular squeeze. Many are already contending with elevated energy contracts after previous price spikes, and further volatility could limit output or delay investment.
- Inflationary ripple effects: As business costs increase, producers may pass some of those expenses on to customers, contributing to persistent inflation pressures. For small and medium-sized enterprises (SMEs), where energy bills can make up a substantial share of overheads, this could mean difficult choices between raising prices or absorbing losses.
- Strategic uncertainty: Even the threat of further supply disruptions or price volatility can delay business decisions. Companies may postpone capital expenditure, renegotiate supplier contracts, or seek government support to hedge against market instability.
Bottom line
Sanctions on Russia’s oil and gas exports are intensifying — and while they aim to weaken Moscow’s revenue streams, they also amplify volatility across global energy markets. For UK businesses, that means higher and more unpredictable costs, challenging competitiveness and planning alike. Firms that can diversify energy sources, improve efficiency, or secure longer-term supply contracts will be best placed to weather the turbulence. The message is clear: global energy geopolitics is no longer background noise — it’s a direct factor in the UK’s business climate.
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