President Joe Biden’s ban on Russian oil comes as gas prices soared to a record high, leaving Americans to wonder how much more they will have to shell out at the pump and if the move will have its intended effect of discouraging Russia’s assault on Ukraine.
“We’re banning all imports of Russian oil and gas and energy,” Biden said Tuesday in remarks from the White House. “That means Russian oil will no longer be acceptable at U.S. ports, and the American people will deal another powerful blow to Putin’s war machine.”
The president warned that the move would probably increase gas prices in the U.S. but said it was necessary in order to ramp up sanctions pressure on the Russian economy, in response to Russia’s war on Ukraine.
“Putin’s war is already hurting American families at the gas pump,” Biden said. “I’m going to do everything I can to minimize Putin’s price hike here at home.”
Even though “the U.S. largely produces sufficient quantities of crude for domestic consumption, oil is a global market,” Jesse Wheeler, a Morning Consult economic analyst, said.
“If global supply declines, the global price will increase,” Wheeler said. “As global and U.S. crude prices increase, U.S. gas prices will also be driven higher.”
The price of gasoline had already hit a record high of $4.17 for a gallon of unleaded on Tuesday, according to AAA. That breaks the previous high of $4.10 a gallon, set in July 2008.
A month ago, oil was selling for about $90 a barrel. Now, prices are surging past $120 as buyers shun Russian crude, with many refiners fearing tougher sanctions against Russia could limit their options for moving supplies.
Shell announced Tuesday it would immediately stop buying Russian crude oil and other energy products from the country “in a phased manner.”
Energy analysts warn prices could climb as high as $200 a barrel for crude oil after oil sanctions are imposed by the West. At that level, the average price for a gallon of U.S. gasoline could exceed $5, a scenario Biden and other political figures are desperate to avoid.
But Biden on Tuesday devoted much of his remarks to redirecting Americans’ anger onto Russian President Vladimir Putin, while also encouraging U.S. energy companies to produce more oil domestically.
The president has said the U.S. plans to release 30 million barrels of oil from the Strategic Petroleum Reserve as part of a global effort to protect consumers and businesses from rising fuel prices while the U.S. and its allies target Russia’s economy.
The U.S. contribution is part of a larger effort with 30 other countries to release 60 million barrels of oil from reserves around the world, he said.
Russian oil accounts for only about 8 percent of U.S. oil imports, according to the most recent data from last year. That accounts for about 5 percent of Russia’s crude oil exports, according to Rystad Energy.
Europe, however, depends heavily on Russian oil, which accounts for about a third of its total crude oil imports.
While the U.S. daily gets about 700,000 barrels of oil from Russia, Europe sources 4.5 million barrels of Russian crude per day.
The U.S. produces most of its crude oil domestically, according to Morning Consult, a global business intelligence company. Of the crude oil products the U.S. imports from elsewhere, the bulk of it comes from Canada and Mexico.
Since the U.S. gets so little oil from Russia, the impact on Moscow will likely be minimal.
Europe banning oil imports from Russia would have much greater ramifications.
“Biden’s decision to ban U.S. imports of Russian oil is noteworthy, but movement toward a European ban on imports of Russian oil and gas would be the real showstopper, given Europe’s relatively high dependence on energy supplies from Russia,” Jason McMann, head of geopolitical risk analysis at Morning Consult, said. “Such a move, if it materializes, would have major economic and geopolitical ramifications.”
“We can take this step when others cannot,” Biden acknowledged Tuesday. “But we’re working closely with Europe and our partners to develop a long-term strategy to reduce their dependence on Russian energy as well.”
Before Biden’s remarks, the United Kingdom’s business and energy secretary, Kwasi Kwarteng, announced his government would phase out the import of Russian oil and oil products by the end of 2022.
“This transition will give the market, businesses and supply chains more than enough time to replace Russian imports — which make up 8% of UK demand,” he said in a series of tweets. “Businesses should use this year to ensure a smooth transition so that consumers will not be affected.”
German Chancellor Olaf Scholz said Monday that Europe deliberately exempted Russian energy supplies from sanctions because there is “currently no other way of securing Europe’s supply of energy for heat generation, for mobility, for power supply and for industry.”
Scholz said Germany has been working with its allies to develop alternatives to Russian energy, but that “doesn’t happen overnight.” He added: “It is therefore a conscious decision on our part to continue the activities of business enterprises in the field of energy supply with Russia.”
Dutch Prime Minister Mark Rutte also warned that if countries moved too quickly to ban Russian oil and gas, it could backfire with “enormous consequences.”
But Dmytro Kuleba, Ukraine’s foreign minister, urged in a Washington Post op-ed Monday that among other measures, countries should do all they can to stop buying Russian oil, “which is now tainted with Ukrainian blood.”