Biden Fails to Act as Gas Prices Increase

Oil prices skyrocketed this week as the US and its allies discussed banning Russian energy imports. Brent crude jumped to $139.13 per barrel and WTI hit $130.50 per barrel Monday before sliding down to $123.21 and $119.40, respectively. 

“We are now talking to our European partners and allies to look in a coordinated way at the prospect of banning the import of Russian oil while making sure that there is still an appropriate supply of oil on world markets,” said Secretary of State Antony Blinken on Sunday. “That’s a very active discussion as we speak.” 

Oil prices had already been on the rise due to the pandemic and have increased by more than 60% since the start of the year. Now, the average price of gas in the US is $4.17 (up from $3.61 a week ago).

“We consider $125 per barrel, our near-term forecast for Brent-crude oil, as a soft cap for prices, although prices could rise even higher should disruptions worsen or continue,” said USB commodity analyst Giovanni Staunovo, adding that a prolonged war in Ukraine could drive prices as high as $150. 

Russia is the world’s second largest oil exporter and produces nearly 10% of the global supply. Some analysts have warned that a ban on Russian oil could send prices to $200 or higher. The resulting impact on gas prices could very well cause a recession as consumers are forced to cut spending to compensate.

So many companies have already stopped using Russian oil that over 60% of the nation’s producers are struggling to find buyers. Major American companies including Starbucks, McDonald’s, and Coca-Cola have already left Russia. British Petroleum (BP) – the largest foreign investor in Russia – ditched its nearly 20% stake in Russian oil company Rosneft, walking away from a 30-year partnership in a move that is expected to cost $25 billion.

“I have been deeply shocked and saddened by the situation unfolding in Ukraine and my heart goes out to everyone affected, said BP Chief Executive Bernard Looney. “It has caused us to fundamentally rethink BP’s position with Rosneft.”

Germany, on the other hand, says it will continue to use Russian oil in fear that a pause could produce a sharp uptick in inflation. Japan made a similar statement, explaining that it would not be able to easily replace Russian oil with other sources. India, which enjoys robust trade with Russia, is actively looking for ways to skirt the sanctions.

In the meantime, House Speaker Nancy Pelosi (D-CA) is drafting a bill that would ban Russian oil imports in the US, halt trade relations between the US and Moscow, and restrict Russia’s access to the World Trade Association (WTO). US officials have also resumed talks with sanctioned oil producers Iran and Venezuela, though Russia has already demanded the US provide a guarantee that any sanctions on Russia will not interfere with trade between Moscow and Tehran.

Saudi Arabia and the UAE – major oil producers who could take action to balance the global oil supply – said they would not be getting involved at this time.

Author’s Note: The United States is the world’s top oil producer and there is no reason we should be importing oil from other countries. President Biden should take immediate action to facilitate energy independence. If he does not, Americans will be forced to endure increasing gas prices and who knows what else.

Sources:

Oil Price Spikes to $139 on Talks About Russian Oil Ban, Iran Deal 
US crude oil spikes to 13-year high of $130 overnight, then gives up most of that gain
Oil is up 60% this year. How high can prices go?

BP quits Russia in up to $25 billion hit after Ukraine invasion