After Russia launched its invasion of Ukraine on February 24, 2022, oil futures for Brent crossed the $100 per barrel mark for the first time since 2014, reaching $105 per barrel. Russia’s attack on Ukraine exacerbates concerns about disruptions to global energy supply as President Biden tells the American public to expect higher gasoline prices due to his sanctions on Russian assets. “As I said last week, defending freedom will have costs for us as well and here at home,” Biden said at the White House. Average U.S. gasoline prices are now $3.54 per gallon. Of course, Biden does not address all the actions he has taken to squash American oil production that could have relieved the pressures from any disruption in Russian oil supplies to the United States. Due to Biden’s anti-oil actions, the United States is no longer energy independent and Russia is now vying with Mexico as the number 2 supplier of oil imports to the United States. In the first 10 months of 2021, oil imports from Russia increased by 29 percent from the previous year, averaging 706 thousand barrels per day. Russia produces 10 million barrels of oil a day, roughly 10 percent of global demand.
Russia’s actions will likely further impact inflation and economic growth, with analysts at JPMorgan Chase saying an oil price increase to $150 a barrel would derail global expansion and boost inflation to over 7 percent. Food prices will be affected not only because of higher oil and fertilizer prices but because Russia and Ukraine are major exporters of wheat, supplying almost 30 percent of global wheat exports, and Ukraine is responsible for over 15 percent of the global corn exports, which now will likely have to be obtained from other markets like the United States. Higher demand for U.S. wheat and corn will result in higher prices for American food products.
Ukraine is also a significant producer of uranium, titanium, iron ore, steel and ammonia, and an important source for the purification of neon—a gas used in the production of semiconductors. Russia is also a mineral-rich country that provides 45.6 percent of the palladium used to produce microchips, as well as large quantities of nickel, and precious metals such as platinum and silver and other commodities that Biden’s non-carbon future relies on. Europe, which gets 40 percent of its natural gas and 25 percent of its oil from Russia, will need to find it elsewhere — thus driving up those costs for Americans as well.
Since Biden’s first day in office last year, gasoline prices have steadily risen across the United States, reaching close to $5 per gallon in some areas. In California, the price for regular averages $4.77 a gallon. The original oil and gasoline price rise is due to Biden’s anti-oil policies because Biden shut down the Keystone XL Pipeline and placed a ban on new oil and gas drilling leases for production on public lands despite Congress requiring that periodic auctions take place. He has also stopped legally issued leases in Arctic National Wildlife Refuge and projects in the National Petroleum Reserve Alaska, which are needed to keep the Trans Alaskan Pipeline System viable since it is now at 25 percent of capacity. In July of 2021, the U.S. received twice as much oil from Russia as it did from Alaska. Instead, all he can think of doing is releasing more oil from the Strategic Petroleum Reserve established for emergencies and continues to push for a non-carbon electric grid and electric vehicles to replace gasoline and diesel vehicles, which places even more demands upon an increasingly intermittent grid.
Russian Aggression Ups the Importance of Energy Security
Rightly so, there is a renewed emphasis on energy independence and national security in Europe, China and Australia that Biden has yet to recognize and implement in his energy policies. Skyrocketing energy prices in Europe spurred additional production and consumption of fossil fuels. Coal imports to the European Union in January rose more than 56 percent from the previous year. Last month, in Britain, the Coal Authority gave a mine in Wales permission to increase output by 40 million tons over the next two decades. In Australia, there are plans to open or expand more coking coal mines. China increased its coal production last year and recently approved three new billion-dollar coal mines.
Despite Biden’s anti-oil and gas policies, U.S. Secretary of Energy Granholm urged American oil producers to raise output, saying “Get your rig count up.” Despite Biden’s policies, but because of high oil prices, shale companies in Oklahoma, Colorado and other states are looking to resurrect drilling that had ceased as Biden pushed renewable energy production. Exxon Mobil plans to increase spending on new oil wells in the Permian basin that are not affected by Biden’s bans since they are not on public lands. The United States could produce much more oil if Biden allowed new drilling on public lands and did away with his policies against new oil and gas pipelines that are needed to move oil, natural gas and their products.
Conclusion
Russia’s invasion of Ukraine and ensuing sanctions from NATO members threaten to exacerbate inflation and supply chain disruptions in the United States, putting additional upward pressure on oil and natural gas and food prices. Higher transportation and manufacturing costs from increased energy prices will cascade throughout the economy. President Biden’s only reaction to the threat on energy is to plan for another release of oil from the Strategic Petroleum Reserve. But, the best way to ensure energy security and provide affordable, reliable energy to Americans is to promote policies that incentivize U.S. oil, natural gas and coal production as other countries are doing and send a clear message that America is open for energy investment and serious about national and economic security.
