Last week, a bipartisan group of US lawmakers introduced the “Russian Energy Imports Act” that would declare a national emergency as a result of the Russian invasion and ban all US imports of Russian energy.
The administration of President Joe Biden had initially opposed a US embargo on oil for fear of exacerbating inflation and rising prices at stations. to
But with popular discontent with Moscow on the rise, the White House now says it is in discussions with allies about imposing an embargo and working to ensure adequate oil supplies, knowing that no decision has yet been made.
The matter raises 6 main questions about the repercussions of the matter on the American and global economies, and here are their answers:
What will be the impact of an embargo on the US oil market?
Russia accounts for less than 10 percent of US imports of petroleum and petroleum products, which include diesel, a low-quality fuel that can be refined into higher-quality products.
The relatively small share of the US energy market means that it is “easier for the United States than anywhere else” to ban those imports, according to Antoine Halfe, a researcher at Columbia University’s Center for Global Energy Policy.
“I wouldn’t underestimate what it would take to fill the Russian oil shortage, but it is achievable,” he said.
What will be the repercussions on oil prices?
Even without the embargo, oil prices rose by 30 percent on the impact of the Russian invasion.
Gasoline prices averaged $4.07 a gallon on Monday, $0.62 more than a month ago and 47 percent higher than a year ago.
Washington and Brussels imposed severe economic sanctions on Moscow with the aim of isolating Russia from the global economy and cutting off its sources of funding. But the sanctions specifically excluded energy-related transactions.
However, experts say some of the reasons for the price hike are due to “self-sanctioning” buyers who avoid buying Russian oil.
Houston-based oil consultant Andrew Lebow believes the market has priced in nearly 3 million barrels per day of disrupted production, due to actions such as tanker owners refusing to load Russian oil or traders pulling out due to a lack of bank funding due to Western sanctions.
“No one wants to buy a load of crude oil that will be confiscated later because it was in violation of sanctions,” Lipow said, citing concern about buying “polluted” crude in association with a sanctioned entity.
Will Europe join the ban?
An American ban would be even more painful if the European Union joined. In general, the European economy depends more on Russian energy resources, especially natural gas, which represents about 40 percent of supplies.
US Secretary of State Anthony Blinken said Sunday that “active discussions” were underway with European countries about banning Russian oil imports, but European officials played down the idea on Monday, saying that the continent’s supplies could not be guaranteed at this stage.
“Europe deliberately exempted Russian energy supplies from the sanctions,” German Chancellor Olaf Scholz announced in a statement, adding, “European energy supplies for heat production, transportation, electricity and industry cannot be guaranteed in any other way at the moment.”
How will the United States compensate for a shortage of Russian oil?
Indications emerged in the form of the impact of the West’s withdrawal from Moscow on the geopolitical scene. The Ukrainian crisis raised the stakes in the Iranian nuclear talks, which could cancel US sanctions on the Iranian oil sector.
In another apparent twist, US officials traveled to Venezuela last weekend for talks with the government of Nicolas Maduro, according to reports. The South American country was once one of the largest suppliers of oil to the United States, but Washington stopped importing from it in 2019 after imposing sanctions on it.
By comparison, Iran is in a better position to increase production, while more questions arise about Venezuela, given the state of its infrastructure, according to Columbia University researcher Antoine Halfe.
He said that Russia is a large producing country so that the shortage of all the lost barrels cannot be filled, but “some of them can be compensated.”
Can American oil producers bridge the difference?
Local majors such as ExxonMobil and Chevron have been cautious about increasing investment in response to higher oil prices, in part because Wall Street is skeptical of big drilling plans. The companies diverted part of their extra money from the higher profits, to the distribution of dividend returns to shareholders and the buy-back of shares.
Keeping the oil price above $ 100 a barrel is likely to stimulate more activity, but producers are monitoring the international scene for developments in the situation.
“The biggest risk here is whether drilling begins and then the United States makes a deal with Iran and this Iranian oil invades the market,” said Stephen Schork, an oil expert.
How will the Russian crisis affect US climate policies?
Biden’s “building back better” bill that is a mainstay of his climate policies is struggling to pass on Capitol Hill, even before national attention turns to Russia’s invasion of Ukraine.
Biden’s critics in the Republican Party said the crisis highlights the need to reconsider White House policies such as rolling back the Keystone pipeline and drilling areas in Alaska and other environmentally sensitive places.
However, environmental activists say that what the crisis has taught is not the need for more domestic oil production, but more investment in electric cars and renewable energy.
“Today, Russia provides 10 percent of the world’s oil,” said Mark Brownstein, deputy head of the Environmental Defense Fund.
“You want to make that oil worthless? Show Putin you don’t need it. This is what accelerating the transition to a clean energy future does,” he added.