Oil prices rise as Ukraine hits Russian pipelines

Global oil markets surge amid pipeline attacks and failed peace talks while Canada watches from the sidelines

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Efforts to broker peace between Russia and Ukraine, led by U.S. President Donald Trump, have thrown oil markets into fresh turmoil. Hopes for a deal briefly raised the prospect of lifting sanctions on Russian crude—potentially flooding global markets with supply and pushing prices down. But with talks stalling and violence escalating, the pendulum has swung back toward deeper conflict and rising prices.

Although the fighting is an ocean away, the economic fallout is global. For Canadians, that means more uncertainty at the gas pump, tighter energy markets and broader financial volatility.

Trump returned from an Aug. 15 meeting with Russian President Vladimir Putin in Alaska claiming a deal was within reach. He floated the idea of a summit between Putin and Ukrainian President Volodymyr Zelensky and offered himself as a potential third participant. In Trump’s view, land concessions and a Ukrainian withdrawal from NATO ambitions were essential.

For a few days, markets responded with cautious optimism. But by week’s end, Russian Foreign Minister Sergei Lavrov dismissed the idea of any summit, accusing Zelensky of rejecting every proposal. Meanwhile, the war intensified.

Russia launched airstrikes near Ukraine’s border with the European Union. Ukraine, in turn, ramped up drone attacks on Russian energy infrastructure, targeting refineries and the Unecha pumping station on the Druzhba pipeline—Russia’s main oil link to Europe.

That pipeline supplies Russian crude to Hungary and Slovakia—countries still deeply reliant on Russian oil. When Ukraine struck the line for the third time in two weeks, it didn’t just hit infrastructure. It hit nerves in Washington and Eastern Europe. Trump, reportedly furious, responded in a letter to Hungarian Prime Minister Viktor Orbán: “Viktor—I do not like hearing this. I am very angry about it. Tell Slovakia.”

Ukraine’s strategy is clear: if diplomacy and sanctions can’t choke off Russian oil revenue, direct strikes on infrastructure might. Ben Aris, editor-in-chief and founder of bne IntelliNews (formerly Business News Europe), reports at least eight Ukrainian attacks on Russian refineries in August alone.

Hungary and Slovakia, both exempt from EU bans on Russian crude, have now asked the European Commission for help protecting their energy security. “The Druzhba pipeline is indispensable for our energy supply,” said Hungary’s foreign minister, Peter Szijjártó. “Brussels must understand they are the EUROPEAN Commission, not the Ukrainian Commission!”

While the EU aims to fully phase out Russian energy by 2027, these exemptions are increasingly at odds with Ukraine’s battlefield tactics and growing Western impatience.

Oil markets are watching closely. West Texas Intermediate rose on four of five trading days last week, snapping a three-week losing streak. It closed Friday at US$63.66, up from US$62.80 the week before.

Phil Flynn of Price Futures Group noted that “negotiations are not going as quickly as the market would have hoped.” ING analysts suggested that as hopes for a ceasefire fade, markets may begin to price in the possibility of tougher U.S. sanctions on Russia.

Global oil prices now move less on fundamentals than on geopolitical tremors. Drone strikes, cancelled summits and angry presidential letters have become market-moving events. That volatility affects Canadian producers, investors and consumers alike. And with so much at stake, you’d expect Canada to be actively engaged in shaping the outcome. Yet our voice is conspicuously absent.

As a G7 and NATO member and a major energy exporter, Canada should be deeply engaged. Instead, we’re barely mentioned. The longer this war drags on, the more exposed our economy becomes to political conflict we’re doing little to shape.

Peace won’t come from vague summit talk or public letters. It will take leadership, compromise and political courage—none of which are currently on display. Until that changes, the war will grind on, the markets will lurch and the rest of the world will keep paying the price.

Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, particularly in the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.