What does a US ban on Russian oil mean for gas prices? How will Americans be impacted?
In the toughest economic sanction to date, President Biden announced a ban on all imports of oil and natural gas from Russia to cut off a key Kremlin revenue stream.
President Biden announced on Tuesday that he had signed an executive order banning the importation of Russian oil and natural gas due to the country’s continued invasion of Ukraine. Fossil fuels play a huge role in the Russian economy and Biden is eager to hit the Kremlin’s main revenue source hard.
"Today, I am announcing the United States is targeting the main artery of Russia's economy," Biden said in a speech on Tuesday. "We're banning all imports of Russian oil and gas energy. That means Russian oil will no longer be accepted in US ports, and the American people will deal another powerful blow to Putin's war machine."
However the increase scarcity of oil in the US will have an effect on products that are made using oil, meaning that the price of gasoline is likely to rise even higher as a result.
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Why will the oil ban affect gasoline prices in the US?
On Tuesday AAA reported that the national average for a gallon of gasoline had risen to $4.25 in the US, marking a second consecutive day in which the record had been broken. The price of gasoline is closely related to the availability of oil because crude oil is a key component in the production of the fuel.
A research report from economists at Capital Economics stated: "We think that a complete ban on Russian energy imports would cause the prices of Brent crude oil and European natural gas to surge to $160 [per barrel].”
For context the all-time record high for crude oil in $147 a barrel, meaning that this would represent a considerable increase. Energy analysts now predict that the average price of a gallon of gasoline could now rise above $5 for the first time.
What next for the price of gasoline?
The executive order signed by President Biden will go into effect immediately, but it does give buyers 45 days to wind down any contracts they have with Russian suppliers. Many Western oil companies had already stopped importing oil from Russia but this step will make that practice universal in the US.
In 2021 the US imported more than 20 million barrels of crude and refined oil products from Russia every month. This is a huge amount but only represents around 8% of total American liquid fuel imports. The US is also able to produce significant amounts of oil itself, and on 1 March announced that it was releasing 30 million barrel of crude oil from the Strategic Petroleum Reserve in response to the tightening of sanctions against Russia.
However despite these efforts the price of gasoline in the US will be higher for as long as the market continues to opt against buying oil from Russia. In his speech Biden cited this as one of the costs of “Putin’s war” and pledged to do what he could to ease the pain at the pump.
"The decision today is not without costs here at home. 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 hikes here at home.”