The ban on Russian oil imports announced by President Biden on Tuesday could have meaningful consequences for the US economy, pushing prices at the gas station while inflation is already high, although it is uncertain how long that impact will last. to be.
“We are banning all imports of Russian oil, gas and energy,” Mr Biden said at a White House briefing. He said the plan would focus on the “main artery” of the Russian economy. While acknowledging that the move would likely push up gas prices, he blamed Russian aggression for that reality.
The ban applies to imports of Russian oil, liquefied natural gas and coal. It also bans new US investment in the Russian energy sector. And it prevents Americans from financing or enabling foreign companies to make investments in Russia.
Europe imports much more of its supply from Russia than the United States, but energy markets are global and the threat of a ban alone has sent commodity prices soaring in recent days.
“Things have been so volatile,” said Omair Sharif, founder of Inflation Insights, noting that it’s been hard to say how much of the surge in oil prices in recent days can be traced back to this particular ban. But the conflict in Ukraine is clearly pushing up gas prices for commodities — so much so that the national average gas price could soar to nearly $4.50 this month, he said, “assuming we don’t move anymore.”
While the oil and gas ban will almost certainly drive inflation in the United States, economists have said the magnitude of the economic impact will depend in large part on how it is structured. For example, it would probably make a big difference globally and in markets if Europeans also ban Russian oil and gas imports, and it is not yet clear whether and to what extent that will happen.
A ban in many countries “would seriously reduce and disrupt global energy supplies and increase already high commodity prices,” Caroline Bain, an economist at Capital Economics, wrote in a research paper ahead of the announcement, estimating the price of the global oil benchmark, Brent oil, would come out at about $160 a barrel in that case.
The price for Brent crude rose about 6 percent Tuesday to about $130 a barrel by midday. By comparison, at the end of 2021, that was about $78 a barrel.
It’s not yet clear how many countries will adopt a similar ban: The White House indicated this week that the United States could act separately on blocking Russian oil imports, noting that countries in Europe are more dependent on Russian oil. energy, something Mr Biden also mentioned on Tuesday.
“Many of our European allies and partners may not be in a position to join us,” he said, adding that allies “remain united in our goal” to hurt Russia’s war effort. That includes the European Union’s efforts to reduce its dependence on Russian energy.
Britain said Tuesday it would take steps to ban the import of Russian energy products. Kwasi Kwarteng, the country’s Minister of Affairs and Energy, said the would phase out Russian oil imports and oil products by the end of 2022.
Other European countries are under increasing pressure to follow suit.
“Everything is on the table,” Franck Riester, France’s foreign trade minister, told the radio station franceinfo on Monday, adding that France should look into possible bans on imports of oil and gas from Russia regarding “impact in terms of pressure on Russia and in terms of economic, financial and social impacts in Europe.”
France’s office of President Emmanuel Macron said Tuesday evening that the country must coordinate with the European Union before taking further steps, but acknowledged that Europe must reduce its dependence on Russia.
“The United States does not depend on Russian oil and gas, but its European partners do,” Macron’s office said in a statement. “We have a long-term policy to eliminate dependence on Russian oil and gas, but in the near future we need to discuss this with our European partners.”
Although Italy is heavily dependent on Russian gas, the country’s government has said Italy would not oppose the effort if the European Union decides to stop consuming Russian gas and oil.
The direct US economic impact of the loss of Russian oil is likely to be remarkable, albeit less severe than what would happen in Europe. The United States imported less than 700,000 barrels of oil per day from Russia in 2021, according to the International Energy Agency. That’s less than 10 percent of what the United States imports worldwide.
Higher global oil and gas commodity prices and rising prices at the pump will add to the inflationary pain already haunting consumers. Prices are rising at the fastest pace in 40 years, and data from this week is expected to show the annual increase spiked higher in February.
The war between Russia and Ukraine and the world economy
Rising gas prices will exacerbate that trend. The national average price hit $4.17 Tuesday, according to AAA, a new high for regular unleaded gas.
“There will also be costs, here in the United States,” Mr Biden said. “Republicans and Democrats understand that.”
Mr Sharif said US inflation could peak at 8.3 percent in March given the rise in gas prices. Before the conflict, he had expected it to decline to 2.7 percent by the end of the year, but now he expects a rate closer to 4.5 percent.
Higher gas prices also erode consumers’ budgets, leaving them unable to spend on other things – so a ban could also affect overall economic growth.
But consumers are sitting on huge piles of cash amassed over the course of the pandemic, and because the United States produces gas domestically, higher prices could also encourage companies to invest and supply more in the United States.
“It’s risky to assume that the old rule about higher prices depressing general economic growth in the US still applies,” Ian Shepherdson, an economist at Pantheon Economics, wrote in a recent note.
High gas prices could be a liability for Democrats during a midterm election year as they hit voters right in the wallet. Republicans have already taken gas prices as a topic of conversation.
“Under Joe Biden, families are paying more for gas than ever before,” Republican National Committee chairman Ronna McDaniel said in a statement Tuesday.
But the White House emphasizes that the price hikes are the result of the actions of President Vladimir V. Putin of Russia, and Mr. Biden pointed out that the United States and its partners are releasing global petroleum reserves.
The president also seemed willing to shift some of the blame onto businesses.
“To the oil and gas companies and to the financial firms – we understand that Putin’s war against the people of Ukraine is driving prices up, we understand that, that goes without saying,” he said. He added: “It is not an excuse to make excessive price increases or to make profits, or any kind of effort to exploit this situation or American consumers.”
Jason Horowitz and Constant Méheut reported.
