Dominating world affairs is Russia's recent invasion of Ukraine, which has sparked oil prices and other commodities to soar.
This has led the S&P/ASX 200 Energy (ASX: XEJ) sector to gain more than 20% since the beginning of 2022. When compared to the S&P/ASX 200 Index (ASX: XJO), the ASX benchmark has fallen 4.4% over the same time frame.
Despite Western reluctance to target and sanction Russia's energy sector, gas and oil prices have reached 8-year highs. The Biden administration stated it was not in the United States' strategic interest to ban Russian oil exports. This is because of the disruption it would cause to the global oil supply and the impact it would have on fuel prices.
So, what does the future hold for investors who hold ASX shares with exposure to the energy markets?
Let's take a look at first how Russia stacks up as a global energy producer.
European dependence on Russian energy
To say that Russia is an important energy supplier is an understatement.
The world's biggest country provides crucial gas and oil throughout Europe, especially to the bloc's largest economy, Germany.
To put this into perspective, Russia accounts for 49% of natural gas to Germany, 46% to Italy, and 24% to France. Other smaller countries such as North Macedonia, Bosnia and Herzegovina, and Moldova receive 100% of their gas supply from Russia.
A Eurostat report published in 2019 stated that Europe consumes 27% of Russian crude oil and 47% of solid fossil fuel imports.
As a whole, Russia exports roughly 10% of oil, 20% of gas, and 20% of thermal coal around the world.
What does this mean for ASX energy shares?
All of the major ASX energy shares have rallied in recent times on the back of multi-year highs for crude oil and natural gas.
While Organisation of Petroleum Exporting Countries (OPEC) has signalled its refusal to increase production growth, energy prices could storm higher.
Last month, the International Energy Agency released its oil market report noting that demand is outstripping supply.
With increased prices, this means additional revenue for Australia's energy companies, which in turn leads to a higher share price.
Already, top industry players like Santos Ltd (ASX: STO) have climbed almost 10% in the past week.
It's more than likely that volatility will put upward pressure on energy prices in the near future.
