WASHINGTON — President Biden announced a ban on the importation of Russian oil and gas Tuesday morning, a move that will have an unpredictable impact on banking, global markets and American consumers.
The United States “is targeting the main artery of Russia's economy. We're banning all imports of Russian oil and gas and energy," Biden said. "That means Russian oil will no longer be acceptable to U.S. ports, and the American people will deal another powerful blow to Putin's war machine.”
Two weeks after the U.S. and its allies
Biden's announcement is a swift change from the administration's prior approach to isolating Russia. As recently as last week, the White House expressed
“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,” Secretary of State Antony Blinken said Sunday on CNN. “That’s a very active discussion as we speak.”
That tentative stance rapidly gave way to a more aggressive and bipartisan push for barring Russian oil imports altogether. Sens. Ron Wyden, D-Ore., Mike Crapo, R-Idaho, Reps. Richard Neal, D-Mass., and Kevin Brady, R-Texas, announced Monday morning that they had reached a deal to introduce legislation to “ban the import of energy products from Russia and to suspend normal trade relations with both Russia and Belarus,” according to a joint statement.
That statement and accompanying legislation were taken down from the House Ways and Means Committee website as of Tuesday morning.
The push for a Russian oil ban has been remarkably bipartisan among lawmakers, with support ranging from House Speaker Nancy Pelosi, D-Calif., to Sen. Lindsey Graham, R-S.C. Analysts say that both Republicans and Democrats believe that reducing — or eliminating — U.S. dependence on Russian oil could help both parties push their agendas in distinct ways.
Any policy that raises oil prices directly or indirectly could feed into a long running Republican priority that U.S. oil firms drill more, said Pavel Molchanov, a senior vice president and energy analyst at Raymond James. But that shift could be balanced in part by evolving consumer preferences that shift away from fossil fuel-powered vehicles and explore the burgeoning market for electric vehicles.
“In that sense, $100 for a barrel of oil will kind of promote the agenda of both parties,” Molchanov said. “But it’s beyond the ability of the government to mandate these decisions. It is fundamentally a question of individuals and companies — how they behave.”
A ban on Russian oil imports could also lead to expanded domestic production, though domestic shale oil producers already have
"There are opportunities to be nimble here," Boltansky said. "You should have some opportunity in specific corridors of expanded loan growth, if you’re able to see new entrants to the market or perhaps a scaling up of activities."
Biden warned energy companies not to use the war in Ukraine to boost profits, even though global energy prices have ballooned in recent weeks.
“Let me say this to the oil and gas companies, to the finance firms that back [them] — we understand Putin’s war against the people of Ukraine is causing prices to rise. We get that, that’s self-evident," Biden said. "But it’s no excuse to exercise excessive price increases, or padding profits, or any kind of effort to exploit the situation or American consumers.”
Biden also seemed to embrace the potential for reducing both the United States and its allies' reliance on Russian energy exports, saying that the U.S. remains a net oil exporter and that his administration is open to expanded domestic production. He added that 90% of domestic oil production occurs on private land, while oil companies are not producing energy from the more than 9,000 oil and gas leases that have already been approved.
"Even amid the pandemic, companies in the United States pumped more oil during my first year in office than they did during my predecessor's first year," Biden said. "We're approaching record levels of oil and gas production United States, and we're on track to set a record for oil production next year."
Biden added that the challenges of weaning the U.S. and its allies off Russian energy imports — a considerable challenge for many European countries — underscores the need to transition the global economy away from fossil fuels.
“This crisis is a stark reminder [that] to protect our economy over the long term, we need to become energy independent," Biden said. "Loosening environmental regulators or pulling back clean energy investment … will not lower energy prices for families, but transforming our economy to run on electric vehicles powered by clean energy, with tax credits to help American families to winterize their use and use less energy, will help.”
But that expanded capacity will take time to come to market, and in the meantime energy costs have been skyrocketing. The price of oil surpassed $120 a barrel by close of business Monday, and on Tuesday, AAA reported the national
Analysts say given significant global instability and uncertainty for the days and weeks ahead, that price pain is unlikely to subside in the near future and could emerge as a major drag on the U.S. economy.
“We're in a period of elevated energy prices, which is going to feed through to the real economy,” Boltansky said. “It's going to have an impact on credit, and it's going to have an impact on economic growth. That's just a fact.”
Thomas Aliff, senior vice president and data consulting leader at Equifax, said Monday at a conference hosted by the Consumer Bankers Association that lenders need to be equipped for unseen risks like the hard-to-predict economic fallout from the conflict in Europe that may make it harder for loans to be paid back.
“The waves are coming in. Are you ready for a bigger wave?” Aliff said. “Ukraine is probably a tsunami.”
However, analysts doubt that the American ban on Russian imports alone will do much to worsen energy prices for U.S. consumers beyond the existing pressures wrought by war in Europe. Russia makes up just a small slice of the U.S.’s oil imports — just under 8% of America’s imported oil came from Russia in 2021, according to the Energy Information Administration. By contrast, nearly 55% of oil imports came from Canada during the same period.
“Certainly, all sanctions have some impact, but this particular sanction — I don't think the Kremlin would lose sleep over the U.S. banning the import of Russian oil,” said Molchanov. “The fact of the matter is, the U.S. has become much more oil independent over the past decade.”
The situation for the European Union is markedly different: The Continent receives roughly 27% of its oil and 41% of its natural gas from Russia. And despite Secretary Blinken's cautious signal on Sunday that European allies were discussing significant energy sanctions, the German government announced on Monday it would
The Biden administration has been extremely wary of any unilateral moves against Russia, opting instead to move in near-lockstep with European allies.
“As policymakers think about how to maximize the impact of sanctions, the more multilateral and global they are, the better,” said Molchanov. “So if the U.S. and Europe work together, that's 60% of Russian oil exports. Now we're getting somewhere.”
But such a maneuver could carry unprecedented economic shocks to global markets. Ethan Harris, head of global economics on the Bank of America’s global research team, wrote in a note dated March 1 that “if the West cuts off most of Russia's energy exports it would be a major shock to global markets.”
President Biden used his State of the Union address last week to tell Americans his administration was using “every tool at our disposal to protect American businesses and consumers” as the U.S. and its allies hammer Russia with economic sanctions.
With energy prices already rising, however, analysts say it’s becoming clear that many American consumers will begin to feel the impact of the war sooner than later.
“Big actions require sacrifice. It’s easy to say that abstractly,” Boltansky said. “But if we want an international response to this, and if we truly believe rhetoric regarding the unwarranted, unprovoked atrocities that we're seeing take place, there has to be a cost for someone.”
“It's pretty clear that, at least economically for us, it's rising energy prices,” he added.
Jon Prior contributed to this article.
