On Tuesday, March 8, U.S. President Joe Biden announced a ban on all Russian oil and other energy imports into the U.S. in retaliation for Russia’s invasion of Ukraine.
Biden made the announcement at a press conference in the White House’s Roosevelt Room saying, “We will not be part of subsidising Putin’s war” adding that the move is a “powerful blow” that strikes at “the main artery of the Russian economy”
Last year, the U.S. imported roughly 200,000 barrels a day of Russian crude oil, and about 400,000 barrels a day of other refined products like fuel oil and distillates. The imports make up about 10 percent of daily U.S. consumption. The Biden administration says it’s confident it can find alternative sources without any undue additional pain on the U.S. economy however stopped short in supplying any significant details.
Biden also said that Americans will need to brace for further increases at the gas pump. “Defending freedom is going to cost,” Biden said.
The action follows pleas by Ukrainian President Volodymyr Selenskyy for the U.S. and other Western officials to cut off energy imports from Russia, which was considered a glaring omission in the unprecedented sanctions currently smothering the Russian economy.
To date, energy exports have kept a steady stream of revenue flowing to Russia despite severe restrictions on its financial sector.
New U.S. investments in Russia’s energy sector have also been banned, according to a statement published to the White House’s website and Americans “will also be prohibited from financing or enabling foreign companies that are making investment to produce energy in Russia.”
To lessen the blow on the U.S. economy, the Biden administration has committed to releasing more than 90 million barrels of oil from the Strategic Petroleum Reserve this fiscal year in addition to an emergency sale of 30 million barrels that was announced last week.
In addition to this the Biden administration, in consultation with International Energy Agency (IEA) member countries agreed to a “collective release of an initial 60 million barrels of crude oil from our strategic petroleum reserves.”
Oil prices continue to soar
Immediately following the announcement, WTI crude and Brent Crude prices surged to $126.90 and $131.00 respectively and further increases are expected over the coming days and weeks.
Michael Tran an energy strategist with the Royal Bank of Canada mused in a note to clients on Tuesday, “How high can oil prices go? Pick a number. This is a market in disarray,” the Canadian Broadcasting Corporation (CBC), Canada’s state-funded news agency reported.
Even without the U.S.’s ban on Russian crude oil, prices were slated to rise to levels never before seen. Analysts are beginning to warn that $200 crude is not impossible this year while others see oil rising to near $300 a barrel in the coming years.
On March 8, Russian Deputy Prime Minister Alexander Novak warned that oil prices would spike to at least $300 per barrel should the West ban Russian crude. On Monday, in a speech on Russian state television Novak said a ban would create “catastrophic consequences for the global market,” CNBC reported.
Novak’s comments assume Europe enacts a similar ban however, due to Europe’s dependency on Russian energy products, an outright ban is considered highly unlikely.
The average gas price at the pump in the U.S. hit a record high on Tuesday with the national average being $4.17 per gallon, according to the AAA. The previous record was $4.10 set in 2008 just prior to the recession and national housing crisis.