U.S. Industries Mull Consequences of Russian Oil Ban

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Researched by Industrial Info Resources (Sugar Land, Texas)--With the U.S. ban on Russian oil imports made official on Tuesday, government and industry officials noted that the imports make up only a small portion of the U.S. energy diet. Even so, gasoline prices continued to climb.

President Joe Biden's executive order in retaliation for Russia's invasion of Ukraine prohibits imports of Russian crude oil, petroleum products, liquefied natural gas (LNG) and coal.

Last year, the U.S. imported an average of 209,000 barrels per day (BBL/d) of crude oil and 500,000 BBL/d of other petroleum products from Russia, according to the trade group American Fuel & Manufacturers (AFPM). Although Russian crude accounted for only 3% of U.S. crude oil imports and about 1% of total crude oil processed by U.S. refineries, Russian crude oil imports are more important to refineries on the West Coast and Gulf Coast, AFPM said on February 25. The trade group emphasized on March 3 it supports the suspension of all future purchases of crude oil and petroleum products from Russia.

Biden's executive order also bans new U.S. investment in Russia's energy sector and prohibits Americans from financing or enabling foreign companies that are making investment to produce energy in Russia.

"We will not be part of subsidizing Putin's war," Biden said on Tuesday.

During his announcement, Biden acknowledged Americans would continue to see rising gasoline prices, adding, "Defending freedom is going to cost."

U.S. gasoline prices averaged $4.17 per gallon on Tuesday, according to the American Automobile Association. As of Monday, U.S. pump prices averaged $4.06 per gallon, "a staggering 45 cents more than a week ago, 62 cents more than a month ago and $1.30 more than a year ago," the AAA said. "The national average has not been this high since July 2008."

Consumers can expect the current trend at the pump to continue as long as crude oil prices climb, the AAA added.

In an effort to ease some of the pain at the pump, the Biden administration has committed to releasing more than 90 million barrels of crude oil from the Strategic Petroleum Reserve this fiscal year, with an emergency sale of 30 million barrels announced last week. International Energy Agency (IEA) member countries have agreed to a collective release of an initial 60 million barrels of crude oil from strategic petroleum reserves, with the U.S. committing half of that in the emergency sale.

U.S. oil and gas production is approaching record highs, while thousands of drilling permits on federal lands go unused, said Biden, who maintained federal policies were not limiting the production of oil and gas. The latest estimate from the U.S. Department of Energy puts total domestic crude oil production at an average of 12 million barrels per day (BBL/d) for this year, short of the all-time record average of 12.3 million BBL/d set in 2019. For related information, see February 10, 2022, article - In a Tight Market, U.S. Concerns Mount Over Offshore Energy Development.

However, Biden still is remembered for placing a moratorium on entering into new oil and gas drilling leases for public lands and waters while existing leasing and permitting practices were reviewed. For more on that, see January 29, 2021, article - Big Oil, Big Business Slam Biden's Pause on New Oil & Gas Leases on Federal Lands and Waters.

At this point, the U.S. appears to be going it alone regarding an immediate ban on Russian energy imports, although the U.K. has said it will phase out Russian oil and oil products by the end of 2022. The European Union, which depends more heavily on Russian imports, is taking a slower approach. In 2021, Russia was the largest exporter of oil and natural gas to the European Union, supplying 40% of Europe's gas and a quarter of its oil. The European Union said it was seeking to fully phase out its reliance on Russian fossil fuels "well before 2030."

Shell to Stop Buying Russian Oil and Gas
In related news, Shell plc (NYSE:SHEL) (London, England) announced Tuesday it would "withdraw from its involvement in all Russian hydrocarbons ... in a phased manner, aligned with new government guidance."

"As an immediate first step, the company will stop all spot purchases of Russian crude oil," the company continued. "It will also shut its service stations, aviation fuels and lubricants operations in Russia."

It added, "We will start our phased withdrawal from Russian petroleum products, pipeline gas and LNG. This is a complex challenge. Changing this part of the energy system will require concerted action by governments, energy suppliers and customers, and a transition to other energy supplies will take much longer."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: LinkedIn.