President Biden finds himself trapped between conflicting demands to curb rising consumer prices while simultaneously banning Russian oil imports to punish Moscow for invading Ukraine, a sanction that threatens more inflation and increases pressure on allies that are more dependent on oil imports.
On Sunday, the US said it was actively negotiating with allies over the ban. These talks come at a time when the Biden administration has been criticized for months for inflation rates hitting a 40-year high, fueled by rising demand, supply chain constraints and labor shortages. But the rising cost of energy is also a major driver of rising consumer prices, as the prices of oil, gas and other commodities have skyrocketed to their highest levels in years.
Now outrage over Russian bombing of civilian targets in Ukraine has prompted lawmakers across the political spectrum to demand that the US ban Russian oil imports. On Saturday, a bipartisan bill to ban such imports gained momentum in the US Senate with 22 co-sponsors. Speaker of the House Nancy Pelosi said she supports the bill.
The pressure threatens to tip the White House’s balance between further punishing Moscow — which even Mr. Biden’s own Democratic Party is now demanding — and keeping oil supplies, especially to US allies who are much more dependent on Russian oil and gas than we are.
Senior officials have been walking a fine line for days, acknowledging calls to ban Russian oil but also emphasizing its importance to world markets, and Secretary of State Anthony Blinken spoke again on Sunday. “We are now in talks with our European partners and allies to consider in a coordinated manner the prospects for a ban on Russian oil imports, while making sure that there are still adequate supplies of oil on world markets,” Mr. Blinken said on CNN. “It’s a very active discussion as we speak.”
According to the US Energy Information Administration, Russia is the third largest oil producer in the world, providing 10% of world supplies last year. Oil traders say fears over restrictions on the flow of Russian energy have fueled a scramble for crude oil that has sent oil prices up 25% last week.
The upward spiral in oil prices has put Mr. Biden in the quandary of not being able to respond to calls to ban imports from Russia without risking even higher gas station prices. High energy prices represent a vulnerability for Democrats ahead of November’s midterm elections, while US allied leaders face similar political risks over energy.
According to the AAA, average gasoline prices in the country have topped $4 a gallon.
Photo: Frédéric J. Brown/Agence France-Presse/Getty Images
“Joe Biden’s failed program is to blame for the highest inflation in decades,” the Republican National Committee tweeted on Friday morning, just hours after Russian troops fired on Ukraine’s largest nuclear power plant and sparked another surge in commodity markets. .
“Now the president is stymied,” said Stephen Brown, a Democrat and former refining lobbyist who now runs the consulting firm RBJ Strategies LLC.
“Republicans win either way,” Mr. Brown said.
When the US and its European allies imposed historically tough sanctions on Russia after its tanks crossed the Ukrainian border in late February, they sought to impose those sanctions in a way that avoided energy shortages and higher oil prices.
The United States imposed sanctions on Russia’s largest banks – Sberbank and VTB – but provided broad benefits on payments for natural gas, oil and oil products. He chose which Russian banks to exclude from the Swift network in a way that would minimize disruption to energy markets.
Russian shelling of Ukrainian cities continues
Moscow moves to more indiscriminate tactics after facing strong Ukrainian resistance and civilians continue to evacuate
People crossed under a destroyed bridge as they fled the city of Irpen, Ukraine, on Sunday.
Alexander Ratushnyak/Associated Press
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People crossed under a destroyed bridge as they fled the city of Irpen, Ukraine, on Sunday.
Alexander Ratushnyak/Associated Press
This attempt failed. Oil markets ignored such nuances, and traders avoided Russian oil, banned or not, for fear that it could end up with government fines or otherwise fund Russia’s war effort. Efforts to replace that offer with alternative sources sent US benchmark oil prices to $118.11 a barrel on Friday, the highest since 2008.
In fact, Russian oil imports to the US are limited. About 8% of all US imports of oil and petroleum products, or about 672,000 bpd, came from Russia last year, said Andy Lipow, president of Lipow Oil Associates LLC, citing EIA data. The EU, by contrast, has imported up to 27% of its oil from Russia in recent years, according to EU statistics.
“We don’t import a lot of Russian oil,” Cecilia Rose, chair of the White House Council of Economic Advisers, said Friday. But Canada has already banned imports of Russian oil, and British leaders have openly discussed the attractiveness of such a move. A US ban could force other allies to follow suit, and such a concerted effort could lead to shortages that drive up prices for everyone.
Meanwhile, the Labor Department is to release its CPI for February on Thursday, after the January CPI posted an annual inflation rate of 7.5%, a rate not seen since 1982.
On Sunday, the nation’s average gasoline price topped $4 a gallon for the first time since 2008, according to AAA data that tracks retail prices daily.
Senators Joe Manchin (D-WV) and Lisa Murkowski (R-Alaska) on Thursday unveiled a bill to ban imports of Russian fossil fuels.
Photo: Jacqueline Martin/Associated Press
Mr. Biden has spent months trying to placate inflation-worried voters and has coordinated with other governments to deal with rising prices by freeing up oil reserves and increasing supplies. “I know this is hard and that Americans are already suffering,” Mr. Biden said last month.
Despite inflationary risks, Sen. Joe Manchin (D-WV), chair of the Senate Energy and Natural Resources Committee, and Chief Republican Lisa Murkowski of Alaska announced Thursday a bill to ban imports of Russian fossil fuels.
Under pressure from journalists about the consequences for American consumers, Mr. Manchin said he would gladly pay 10 cents more for a gallon of gasoline to help Ukrainians. Mr. Manchin has been outspoken about his concerns about inflation, criticizing price increases as a tax on American consumers.
But he said, “This is war.”
The oil industry itself came out in support of the ban. At the end of last year, US refineries had already begun cutting supplies to Russia. Refinery trade group American Fuel & Petrochemical Manufacturers shared the group’s views with lawmakers and their staff on how to limit supply disruptions as a result of the ban and said it supported a ban on new purchases of Russian oil from the US.
Mr. Biden has sought to promote renewable energy as part of his strategy to tackle the inflationary impact of fossil fuels, whose prices can be volatile. But this is at best a long-term solution.
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Instead, Republicans want Mr. Biden to “change his policies,” according to a letter signed Friday by 25 Republican governors. Their recipe is less help for cleaner fuels and softer environmental regulations; more sales of oil and gas leases and permits for federal lands; and faster permits for oil and gas pipelines. Industry analysts say these steps will also take years to boost energy supplies.
On Thursday, Senator Rob Portman (R-Ohio) directly blamed the Biden administration for slowing down industry on public lands and for its decision to revoke a key permit to build the Keystone XL oil pipeline.
Ms Murkowski said Mr Biden could calm the markets by making a commitment to increase domestic energy production. “But right now this administration is giving us the signal that we are going to keep ours in the ground and will be counting on it from somewhere else,” she said.
“And now we understand that we counted on Russia’s help in this,” said Ms. Murkowski.
— Sabrina Siddiqui contributed to this article.
Russia’s attack on Ukraine helped lift the price of oil above $100 a barrel for the first time since 2014. Here’s how rising oil prices can further push up inflation in the US economy. Photo illustration: Todd Johnson
Write to Timothy Puko, [email protected] and Lindsay Wise, [email protected]
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