- The move against Russian energy imports comes almost 2 weeks after the invasion of Ukraine.
- The ban is expected to deliver a devastating blow to the Russian economy.
- US gas prices are expected to rise in light of the ban, but the extent is unclear yet.
A recent news article published in the USA Today Biden announces ban on all Russian energy imports over Ukraine invasion; experts expect gas price spike.
President Joe Biden announces a ban
President Joe Biden announced a ban on the U.S. import of all Russian energy products to target “the main artery of Russia’s economy” in the latest effort to ratchet up sanctions over President Vladimir Putin’s invasion of Ukraine.
“Russian oil will no longer be accepted at U.S. ports,” the president said Tuesday at the White House. “We will not be part of subsidizing Putin’s war.”
Though Biden said the move would deal a “powerful blow to Putin’s war machine,” he warned the decision would be felt at home, where Americans see prices rising at the gas pump.
The president said he made the decision in consultation with European allies but they may not be in a position to join the ban. He said the United States is working closely with them to develop a “long-term strategy” to reduce their dependence on Russian energy.
Ban on important products
The ban extends to purchases of Russian crude oil, certain petroleum products, liquefied natural gas and coal, a senior administration official said on condition of anonymity to discuss details of the action.
The official said the ban takes effect immediately but will allow a 45-day period to wind down purchases under contract.
Shortly after Biden’s announcement, Britain announced it will phase out Russian oil imports by the end of the year. That will allow enough time for companies to adjust and consumers to be protected as alternative supplies are found, Prime Minister Boris Johnson said in a statement.
8% Russian oil imported
The United Kingdom imports 8% of its oil from Russia.
Lawrence Ward, an expert on national security law and trade at the international law firm Dorsey & Whitney, said Biden’s move is “quite possibly the last step that America can take to inflict harm on Russia without putting boots on the ground in Ukraine.”
U.S. and European allies had insulated Russian oil from the sweeping economic sanctions placed on Moscow, citing its effect on the global energy markets.
The ban is expected to devastate the Russian economy, which relies on oil and gas production for more than 40% of the country’s revenue.
“In the short term, you’re going to see prices definitely go up,” energy expert Gianna Bern said. “How much, it remains to be seen, and where and how the void gets filled.”
Bern, a finance professor at the University of Notre Dame’s Mendoza College of Business and author of “Investing in Energy,” called the ban “the biggest opportunity to make a dent in” Russia’s coffers.
“The oil and gas imports that have been coming into the United States needed to be addressed,” she said.
Gas prices go up
Though Russia doesn’t export much oil to the USA, Biden acknowledged the American cost. He pointed out the price of gas has gone up 75 cents since Putin began his military buildup at Ukraine’s borders. Record-high inflation has also driven up gas prices.
“With this action, it is going to go up further. I’m going to do everything I can to minimize Putin’s price hike at home,” he said.
The president noted the United States, in coordination with partners, is releasing 60 million barrels of oil from joint reserves; the U.S. commitment is about half of that emergency sale.
A Quinnipiac poll released Monday found that 7 in 10 Americans support a ban on Russian oil, even if it means higher gas prices.
The White House faced mounting pressure in Congress to act on Russian energy. A bipartisan group of lawmakers said Monday it had reached a deal for a legislative path to ban the U.S. import of Russian energy products and suspend trade relations with Russia and Belarus.
US can ban imports more easily than Europe
Though the United States has closely coordinated with allies in imposing sanctions, it would be more difficult for European countries to ban imports because of their greater dependence on Russian oil and gas.
Russia, the world’s third-largest producer of oil and second-largest producer of gas, supplies about 30% of Europe’s oil and 40% of its natural gas.
“It’s going to be headache here. Make no mistake. Maybe more of a migraine,” said Patrick De Haan, head of petroleum analysis at GasBuddy, which monitors fuel supply and prices.
“It’s not the end of the world for the U.S., but it would be much closer for Europe.”
German Chancellor Olaf Scholz said Monday that Europe cannot secure its energy supplies without imports from Russia. Finance Minister Mihaly Varga said Hungary would not support sanctions on Russian energy.
“I would look at it through a different prism than past coordinated efforts,” White House press secretary Jen Psaki said Monday when asked about the United States banning Russian oil.
Energy companies, including ExxonMobil and BP, have moved to sever ties with Russia, despite Western reluctance to cut off energy imports. Shell, which apologized for purchasing a cargo of Russia crude oilafter the invasion, said it would shut down its operations in the country and no long purchase Russian oil.
In 2021, the United States imported about 700,000 barrels per day of crude oil and petroleum from Russia, according to the White House. The Europeans imported about 4.5 million barrels per day of oil.
Russia accounts for about a third of Europe’s oil imports, Psaki said Monday.
Even before Biden’s announcement, the stock market fell and energy prices jumped Monday as lawmakers and administration officials discussed imposing more sanctions.
Record US gas prices
The Biden administration has released oil from the Strategic Petroleum Reserve to ease prices.
The national average for a regular gallon of gas broke the record Tuesday. The average cost was $4.17, an increase of more than 50 cents from last week, according to AAA.
The administration has talked with large oil producers and suppliers around the world about how to mitigate the impact.
Psaki was pressed Monday about conversations administration officials had with oil-producing Venezuela, Iran and Saudi Arabia – countries accused of committing human rights abuses or other troublesome acts. She said discussions have been on a range of issues.
“It’s in everyone’s interest to reduce the impact on the global oil marketplace,” she said.
Sen. Bob Menendez, D-N.J., chair of the Senate Foreign Relations Committee, said Monday that the administration’s efforts to stop Russia should not be undercut by propping up Venezuelan President Nicolás Maduro.
“The democratic aspirations of the Venezuelan people, much like the resolve and courage of the people of Ukraine, are worth much more than a few thousand barrels of oil,” he said in a statement.
Bern said the United States could fill the gap by increasing imports from Canada and Mexico.
She said pump prices might not fall until the price of crude oil rises so much that the transportation sector and everyday drivers reduce their use in response, decreasing demand.
“We’re not there yet,” she said, “but I think it could happen.”
De Haan said cutting off Russian oil could send record-high gas prices even higher.
“It’s difficult to parse out, but I think we’re headed to $4.50” per gallon, De Haan said. “By the summer driving season, by the Memorial Day weekend, it’s really going to pinch Americans who are living check to check.”
Higher prices could remain for months, rather than days or weeks, he warned, affecting all types of fuel, including gasoline, diesel and jet fuel.
If Russia cuts off oil supply to European allies in retaliation, that could affect U.S. consumers, Ward said.
Travel to Europe could become “drastically more expensive,” and COVID-19-related supply chain problems could be exacerbated as shipping costs rise.
Mixed reaction to the move against Russia
After the president’s announcement, the head of the Republican National Committee attacked Biden over high gas prices without saying whether the GOP supports the import ban.
RNC Chairwoman Ronna McDaniel said in a statement that “Biden’s agenda is to blame for the pain at the pump.”
The American Petroleum Institute – which said it has started to unwind its relationship with Russia – backed the ban, as did the U.S. Chamber of Commerce. Both said the United States should produce more oil and gas to lessen dependence on foreign energy sources.
Biden pushed back on the argument that the administration holds back domestic energy production. Biden said oil and gas production approach record levels.
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Source: USA Today