4:06 p.m. ET, June 26, 2023
The US turned to oil producers at home and abroad as chaos raged in Russia, an official said
By CNN’s Matt Egan and Kevin Liptak
As Russia faced a shocking insurgency, White House officials reached out to foreign and domestic oil producers to highlight the dangerous situation unfolding in one of the world’s top oil powers, a US official told CNN on Monday.
The talks with oil producers were described as precautionary in nature. They came as other American officials were seeking more information about what was really happening in Russia and trying to assess the possible consequences, including for the global economy.
Wagner mercenary boss Yevgeny Prigozhin sparked international concern over the weekend when he seized a Russian town and threatened to march all the way to Moscow.
On Monday, US President Joe Biden said he had directed members of his national security team to “prepare for a range of scenarios” while the possible insurgency was underway.
Officials from the White House, the Energy Department and the Treasury Department did not comment on the contact with the oil producers.
The shocking images raised the specter of a nightmare scenario for the US economy, in which instability would halt Russian oil flows and send gas prices skyrocketing just as inflation has cooled.
“Russia is important because it is the world’s largest net oil exporter. Period,” said Bob McNally, a former senior energy official for President George W. Bush. “Revolutions in big oil countries are a huge thing. I’m sure minds in the White House were focused over the weekend.”
Possible effects: According to the International Energy Agency, Russia exported 7.8 million barrels of oil and petroleum products daily in May.
McNally, president of consulting firm Rapidan Energy Group, said the chaos in Russia could theoretically halt oil production or stall export facilities. He recalled how the Russian invasion of Ukraine earlier last year sent shockwaves through energy markets.
“When we thought we were going to lose Russia – just the thought of it – sent gas prices up to $5 a gallon,” McNally said.
Investors breathed a sigh of relief when Prigozhin’s uprising was short-lived and the Wagner boss reversed his march toward Moscow. After a brief surge on the news from Russia, US oil prices ended just 0.3% higher at $69.37 a barrel on Monday.
Helima Croft, a former CIA analyst who now heads global commodities strategy at RBC Capital Markets, told clients Sunday she understands the White House was “actively engaged” on Saturday to “regard key foreign and domestic producers.” of emergency planning.” The market would be well supplied if the crisis had an impact on Russian production.”
Croft said a “significant concern” is that Putin would declare martial law and prevent “workers from showing up to major terminals and energy plants,” potentially halting “million-barrel exports.”
The former CIA analyst recalled how deep unrest in Libya over the past decade has shut down major production in that OPEC country and sent oil prices skyrocketing. “At the same time, there was concern that important pipelines could either be directly attacked or accidentally damaged if the insurgency led to full-scale war,” Croft wrote in a note.
McNally said it’s standard practice for US energy officials to gather intelligence during crises like the one in Russia. He noted that it is “good business practice to check with industry sources at a time when the world’s largest exporter is experiencing shocking instability.”