Global Energy Market Scrambles As Big Oil Companies Pull Out of Russia

As Vladimir Putin escalates his attacks on Ukraine, big oil companies are following each other out of Russia, joining a growing list of Western companies that have announced they are exiting in condemnation of Moscow's invasion of a sovereign nation.

ExxonMobil is the latest, announcing Tuesday it will exit Russia oil and gas operations and halt new investment, Reuters reported, effectively ending its decades-long involvement with Russia. The decision followed similar announcements from both BP and Shell, indicating these international energy giants no longer see Russia as a secure investment.

"We deplore Russia's military action that violates the territorial integrity of Ukraine and endangers its people," ExxonMobil said in a statement Tuesday.

"We are deeply saddened by the loss of innocent lives and support the strong international response," the statement added.

BP announced Sunday it will sell its shares in the Russian-state firm Rosneft, NPR reported. BP chief executive Bernard Looney and former executive Bob Dudley both resigned their seats from Rosneft's board the same day.

As Russia's largest foreign investor, BP has arguably become one of the most prominent companies to leave Russia since its troops first invaded Ukraine last week.

BP's competitor Shell, Europe's largest oil company, followed suit and announced Monday it will cut ties with Russian state-owned energy Giant Gazprom.

"We are shocked by the loss of life in Ukraine, which we deplore, resulting from a senseless act of military aggression which threatens European security," Ben van Beurden, Shell's chief executive, said in a statement Monday.

Both Gazprom and Rosneft's London-listed stocks on Monday suffered substantial losses, NPR reported, losing 42% and 53%, respectively.

The weight of global sanctions is proving catastrophic for Russia, as its economy is teeters on the brink of collapse. But the unprecedented sanctions are also taking a global toll, and the effects of exiting the country will reach well beyond Russia's borders.

American gasoline prices have risen about a penny a gallon every day over the last week, The New York Times reported Sunday, and the risks of rising energy prices remain high as Putin's invasion pushes forward.

The current national average price of gas is $3.61 a gallon, up 26 cents from February and roughly a dollar from a year ago, CBS News reported, based on data from AAA.

San Francisco on Thursday became the first U.S. city with an average gas price of more than $5 per gallon, CBS News reported. Experts say rising oil costs will continue to push prices up at gas stations all across the U.S.

Russia's war in Ukraine has caused a rupture in the global economy to an extent largely unseen in nearly eight years.

The price of Brent crude oil, the international benchmark, increased Wednesday to $110 a barrel, its highest level since the summer of 2014.

The cost of European natural gas, Grist reported, has already been at a record high since last summer and increased by almost 20% in a single day as Russian bombs pounded Ukrainian cities on February 24.

Russia is the largest natural gas exporter in the world, BBC News reported, and the world's second-largest exporter of crude oil, accounting for about 12% of the world's supply. Its invasion of Ukraine is hitting global energy markets hard.

"If flows of oil and natural gas from the country are disrupted," Grist reported, "the entire world could end up paying more for energy at a time when economic recovery from the coronavirus pandemic is increasing demand."

The departures of major international oil companies impacts both sides.

Russia's state energy companies will lose partners that provided both capital and expertise, the LA Times reported, while big oil companies will ultimately write down billions of dollars in the value of their investments.

BP Russian assets totaled roughly $14 billion last year, NPR reported, and the company could be charged as much as $25 billion for ending its Russian investments.

But BP stands behind its decision to cut ties with Russia.

"Like so many, I have been deeply shocked and saddened by the situation unfolding in Ukraine and my heart goes out to everyone affected," BP Chief Executive Officer Bernard Looney said in a statement Sunday. "It has caused us to fundamentally rethink BP's position with Rosneft."

"I am convinced that the decisions we have taken as a board are not only the right thing to do, but are also in the long-term interests of BP," Looney added.

BP is also looking at how the company can support the wider humanitarian effort.

The Ukraine invasion has led to a mass exodus of companies from Russia, effectively reversing three decades of investment by Western and other foreign businesses there that followed the collapse of the Soviet Union, Bloomberg reported.

And as Putin advances his attack on Ukraine, the momentum to leave Russia, despite the considerable ramifications, is growing.

The decisions from BP, Shell and ExxonMobil to cut ties with Russia can be seen as part of a bigger global movement to isolate Moscow over the unprovoked and unceasing violence in Ukraine.

"Our decision to exit is one we take with conviction," Shell's van Beurden said. "We cannot — and we will not — stand by."

Smoke billows over Kyiv after Russian strike
Smoke billows over the town of Vasylkiv just outside Kyiv on February 27, 2022, after overnight Russian strikes hit an oil depot. DIMITAR DILKOFF/AFP via Getty Images