Now, the U.S. is targeting the heart of Russia’s economy: its energy sector. On Sunday, Secretary of State Antony Blinken stated that the Biden administration was in “very active conversations” about banning Russian oil imports to the U.S. while a bipartisan group a senators called for a ban.
Oleg Ustenko is an economic advisor to Ukraine’s president. He wrote an opinionpleading for the world to stop what he called Russia’s “blood oil”, which supplies almost $1 billion per day to Moscow, and which he claims is funding the war in Ukraine. He wrote, “Buy nothing Russian.”
Analysts at Goldman Sachs stated Monday that such pleas are resonating on Capitol Hill and that a vote by Congress to ban imports of Russian crude oil would likely be passed with “fairly broad support.”
Here’s what banning Russian oil imports to the US would do for Americans at the pumps and elsewhere, as U.S. gasoline prices are nearing an all time high.
Imagine what a ban might look like
The U.S. has a lower dependence on Russian oil than Europe. According to Troy Vincent, senior market analyst at DTN (a commodities research company), about 8% of U.S. crude oil imports were from Russia last year. However, as of January, almost no Russian oil was entering the U.S.
Vincent and other analysts believe that this makes it more likely that the U.S. will take action on its own to punish Russian energy and impose oil-related sanctions. The European Union, which is more dependent on Russian oil, may join the U.S. later.
Vincent stated that there are two possible forms of U.S. sanctions. The U.S. could sanction Russian oil exports. This would mean that it would not buy any Russian oil and refuse to engage with any country that does, similar to how the U.S. has approached Iranian sanctions in recent years.
A U.S. embargo against Russian energy is a more sensible and likely option. Vincent stated, “We’ll say: ‘Nobody will touch Russian oil in the U.S., but it’s up to the EU decide their fate.”
Weighing less oil means more gasoline
Short-term, the elimination of Russian oil will likely result in higher gas prices in America.
Capital Economics economists stated in a report that they believe that Russia’s energy imports should be banned completely. This would cause Brent crude oil and European natural gasoline prices to soar to $160 per barrel.
According to economists and energy analysts, this level would erase the record $147 per barrel set in 2008 and push average U.S. gas prices above $5 per gallon.
Quinnipiac poll Monday showed that a majority of Americans support banning Russian oil, even though it may mean higher gas prices. This could change if motorists realize that they are paying more for gas and inflation is eating into their household budgets.
Clayton Allen, the Eurasia group’s managing director for the United States, said that “we’re not positive toward Russia until you really explain the U.S. costs.” This is a political risk research company.
Allen stated that “If Biden wishes to impose really severe measures, it might make sense to do so sooner while the public sentiment is on his side.”
The diplomatic decision is already being weighed by gas prices. White House officials have emphasized their reluctance in taking any actions that could increase gas prices.
Allen stated that sanctions would force the U.S. to raise energy prices — it may only be a temporary increase, but they are clearly concerned about it.” They have not spent as much time as they would have liked trying to domesticate Russia’s idea that U.S. citizens may have to pay some of the costs of isolating or punishing Russia.
Venezuela and Iran are wild cards
The U.S. and its international partners have begun releasing oil from their reserves to limit the effects of higher prices. Allen stated that historically, oil prices have risen for up to three weeks after the nation’s Strategic Petroleum Reserve is opened.
Allen stated that if you are concerned about gasoline being $5, an SRP Release won’t bring gas back down to $3.50 but will stop the oil market seizing up as it did in 1970s.
Biden’s administration is currently negotiating Iran’s entry into a nuclear control deal, which would allow Iranian oil to return to the global market. Vincent, DTN’s director of communications, stated that Iran is capable of producing about one-fifth the oil that would be exported to the world market in the event of Russia’s withdrawal.
The U.S. wants to improve relations with Venezuela. Venezuela has been prohibited from selling oil to America since Trump’s administration.
