On 8 March, following the Russian invasion of Ukraine, the United States and Great Britain imposed an import ban on Russian oil and gas. Europe much more dependent on Moscow did not join the decision. London immediately said that the embargo will be gradual and will abandon Russian oil only by the end of the year which is around 8%, which is considerably lower than most other European countries.
According to the IEA (International Energy Agency), Russia, the largest crude oil exporter in the world, exported almost 8 million barrels a day to global markets at the end of 2021. Of these, 60% arrive in Europe, 2% in Great Britain and 8% in the USA. Faced with the embargo, Russian Deputy Prime Minister Alexander Novak said the price on the markets could reach $ 300 per barrel. An exaggeration, for many analysts.
The US is the largest producer of oil and gas
For the United States, the decision is not so traumatic. Russian hydrocarbon (oil + gas) import for Washington is worth about 8% (3% for crude oil) equal to 700,000 barrels per day. A minimal figure compared to the very strong dependence that Europe has and which for this reason has not imposed the measure. The US, which is the world’s largest producer of oil and gas, however, they are re-establishing relations with countries that were ‘enemies’ such as Venezuela until yesterday.
On March 6, the White House sent a US delegation to speak with the government of President Nicolas Maduro. From what has been learned, the focus of the discussion was precisely energy supplies and Venezuela could increase production by at least 400,000 barrels per day (bpd).
The mitigating circumstances of Europe
In the communiqué of 8 March, the White House acknowledges the ‘extenuating circumstances’ for Europe. “The United States – it is described in the document – is able to take this step thanks to the solidity of our national energy infrastructures and we recognize that not all of our allies are currently able to join us. But we are united with our allies in working together to reduce collective dependence on Russian energy and maintain growing pressure on Putin, while taking active measures to limit impacts on global energy markets and protect our economies. ”
The price the US risks paying
In reality, the measure will have more exogenous than endogenous impacts but, explains an analyst, it is part of the price to be paid that the West is aware of bearing by imposing sanctions on Moscow. On March 7, when rumors began to circulate, Brent flew to nearly $ 140 ($ 139).
The announcement has created a boomerang effect: prices have shot up just what the government has been fighting for over a year, since the anti-Covid restrictive measures ended, global demand has increased beyond supply causing the rise in inflation (at the highest in 40 years) and that of fuel prices.
Also on March 8, gasoline in the United States reached a record level of $ 4.17 per gallon (about four and a half liters), beating the record of July 2008 when a gallon of gas reached an average of $ 4.11 per gallon. .
The price of gasoline and Biden’s future
The issue of the price of gasoline for Biden is absolutely urgent in light of the Mid Term elections scheduled for November 8th. It is well known that US consumers, when they go to vote, look more at their wallet than at political programs. This is why Washington is doing everything to lower the price of crude oil (and consequently of gasoline) so as not to have a Republican majority Congress in November.
The release of strategic stocks
Since last November, the administration has been committed to releasing over 90 million barrels from the Strategic Petroleum Reserve (strategic reserves), precisely to bring down the price of crude oil. After intense coordination, The United States and the AIE agreed on a collective release of 60 million barrels of oil initially on 10 March (30 million to the US). It is important to remember that last November when the US decided on the first release, the International Energy Agency disassociated itself.
“It is not our answer, the offer is there but it does not reach the consumers. Let Opec + act”, said the director Fatih Birol on that occasion. It was November 23 and the United States announced the release of 50 million barrels from strategic reserves in coordination with China, India, South Korea, Japan and Great Britain. After the many vain appeals to OPEC + to increase the offer, Joe Biden has decided to go it alone.
Very limited impact on prices
These moves have had very little impact on prices, which have continued to rise since November, clearly making what Birol said exactly: only Opec + can bring prices down by producing more crude oil. Which he has so far avoided doing also because the leaders of the organization are Russia and Saudi Arabia that since the Biden administration identified Prince Mohammad bin Salman as the instigator of the murder of journalist Jamal Khashoggi has cooled diplomatic relations with Washington.
As mentioned, the stop to imports of Russian crude oil will have more internal impacts for the US than global with a strong probability that the further rise in crude oil prices could raise inflation with political repercussions for Biden. A date to be marked in red on the calendar is 31 March when OPEC + will meet to decide the production policy.
From what the first rumors report, the organization will stick to an increase of 400,000 barrels per day this time too (as it has done since August), an amount considered absolutely insufficient.
The US green turn is limited
Precisely for this reason, the United States, despite the electoral promises of a green transition, have resumed producing oil & gas at the highest levels. “US oil and gas production is approaching record levels,” the White House explained a few days ago, stressing that “federal policies are not limiting hydrocarbon production“.
On the contrary, the administration was clear that, “in the short term, supply must keep pace with demand, at home and around the world, as we move to a secure future of clean energy.” Natural gas production has never been higher and Washington expects crude oil production to reach a new high next year