War in Ukraine: “It could have significant consequences”, if the conflict ends, could energy prices fall?

Nearly three years after the start of the Russian invasion of Ukraine, the prospect of a ceasefire has never been more relevant. In any case, this was the promise made during his campaign by the new American President Donald Trump, who made his official return to the White House this Monday, January 20: to end the war in 24 hours.

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Without talking about delay, Donald Trump’s first months in Washington could quickly outline the outlines of an end to the conflict between Russia and Ukraine. With an essential question for European countries: what consequences would it have for energy prices? “It will depend on a fundamental point, but we can logically think that if the war is over, this will also mark the end of sanctions against Russia,” says Philippe Chalmin, economist and professor specializing in the subject. raw materials and energy. “And in this case, it would have significant consequences for the markets, whether it be oil or gas, and therefore electricity.”

“The trend would rather be downward”

And for the economist, there is little doubt, “the trend would rather be downward”, even if the situation is a little more “ambiguous” for oil than for gas. “Because today there are countries which benefit a lot from a discounted price on oil from Russia (China, India, etc.). So we can imagine that if European sanctions were lifted, there would be a sort of rebalancing the market”, notes the Paris-Dauphine professor. Without forgetting the fact that other geopolitical phenomena are playing out, particularly in the Middle East, with potentially more harmful consequences on the market. “The United States has initiated new sanctions on its side, against Iran or Venezuela for example,” recalls Philippe Chalmin.

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But when it comes to gas, “it could be totally different,” notes the specialist, “because we can imagine that all the countries of Eastern Europe, up to Germany, would resume their purchases.” Certainly, “the two Nord Stream gas pipelines are currently out of order, but there are the land gas pipelines, which pass through Ukraine. They are now closed, but they could start flowing again, so This would inevitably result in a drop in prices.”

Especially since the Russians would have every interest in “maximum loading” the pipes, “so as to reduce the market share recovered by liquefied natural gas, at least in continental Europe”. And who says a drop in the price of gas, necessarily means a drop in electricity, “it’s obvious”. “Even if already last year, the price of electricity in Europe, on average, fell considerably,” underlines Philippe Chalmin.

Unpredictable

But all his thoughts remain very hypothetical with a man as unpredictable as Donald Trump at the head of the United States. “Our forecasts for 2025 are based on a drop in prices, whether for oil or gas, but on the assumption that the war continues and that there is no major geopolitical change. Unfortunately, today, it’s unpredictable,” explains the man whose CyclOpe report on raw materials markets is due out at the end of January.

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One thing seems more certain: it won’t happen tomorrow. “Donald Trump began to say that he was not giving himself a day, but rather six months to end the conflict. So let’s imagine in the best case scenario that there is a ceasefire during the summer 2025, before the consequences in terms of sanctions are felt, it would rather be for 2026.”