As Russia’s invasion of Ukraine threatens to roil international oil markets, President Joe Biden pledged Thursday to use every tool at his disposal to shield American consumers from higher gas prices.
“I know this is hard and that Americans are already hurting,” Biden said. “I will do everything in my power to limit the pain the American people are feeling at the gas pump.”
Biden spoke to reporters as the White House unveiled a series of sanctions administration officials said were designed to hammer Russia while avoiding harsh blowback on American consumers and businesses.
The sanctions are focused on financial institutions and Russia’s capacity to obtain cutting-edge technology while carving out areas such as energy, Daleep Singh, a deputy national security advisor, told reporters at the White House.
“We’ve intentionally scoped our sanctions to deliver severe impact on the Russian economy, while minimizing the cost to the U.S. as well as our allies and partners,” Singh said. “To be clear, our sanctions are not designed to cause any disruptions to the current flow of energy from Russia to the world.”
[Biden hits Russia with new export controls and financial sanctions]
Singh said oil and gas represent one area where Russia has systemic importance to the global economy.
“We’re not going to do anything which causes an unintended disruption to the flow of energy as the global economic recovery is still underway,” Singh said.
In remarks earlier in the day, Biden warned U.S. oil and gas companies not to exploit the situation by hiking prices to increase their profits. He also indicated releases from the U.S. Strategic Petroleum Reserve and reserves of other countries could be coming.
“We are closely monitoring energy supplies for any disruption,” Biden said. “We’ve been coordinating with major oil-producing and consuming countries toward our common interest to secure global energy supplies.”
Uncertain trigger
White House Press Secretary Jen Psaki was asked at her briefing what price level would trigger a release from the strategic reserve. She declined to offer a specific price point but said the president has been talking to leaders in the Middle East and elsewhere for weeks about ensuring an adequate supply on the market.
The invasion and its effect on oil supplies come as Democrats face potentially rocky midterm elections, with voters concerned about inflation generally and gas prices specifically.
Any impact on oil prices will likely appear in debates about Biden’s environmental agenda, as well. Climate hawks are likely to say the crisis highlights the importance of promoting renewable energy sources and electric vehicles, while fossil fuel backers can be expected to argue Biden should move to ramp up domestic oil and gas production.
Sen. Mike Braun, R-Ind., said Thursday, “The U.S. must unleash independent American energy production to lessen the pain of rising fuel prices on Americans.”
The Biden administration has limited options to stabilize the prices of oil or gas, which trade on global markets, experts said.
“The unfortunate truth is that there are not that many options to address oil and natural gas prices in the short term,” Richard Newell, CEO of Resources for the Future, a nonpartisan research organization, said in an interview. “The only short-term policy instrument of any significant relevance is the strategic petroleum reserve, and even that is limited in its effectiveness.”
Because there hasn’t been a disruption in oil markets, he said, “I don’t think we’re at the point where that makes sense to use.”
When the administration in November released 50 million barrels from the reserve — a network of caverns and salty caves in Louisiana and Texas that contains 582.4 million barrels, according to Energy Department data — the impact was minimal.
Newell, who worked at the Energy Information Administration during the aftermath of Hurricanes Katrina and Rita as well as during the Arab Spring in the early 2010s, said U.S. officials are likely in contact with the International Energy Agency and top oil- and gas-generating nations.
“The ability of those countries to produce more oil and gas in the short term is actually quite limited,” he said. “There isn’t a lot of spare capacity that could be brought online in short order.”
As Samantha Gross, director of the Energy Security and Climate Initiative at Brookings Institution, put it: “There is precious little that Biden can do about rising oil prices.”
Biden has resisted calls to eliminate Russia from the global electronic banking system called SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunication.
“He’s catching a bit of flak for not cutting Russia out of the SWIFT system. I don’t think that’s the worst thing,” Gross said in an interview.
“Cutting the Russians out of SWIFT is a very indiscriminate sanction,” she said. “I would worry that people would have a hard time paying for Russian oil and gas. They wouldn’t have the ability to close a transaction. … So that is something that the administration is already doing that isn’t bringing prices down from where they are but is keeping things from getting worse.”
Russian energy
Home to about 146 million people and the largest country by territory, Russia is the No. 3 producer of oil, behind the U.S. and Saudi Arabia, and the second-largest gas producer, after the U.S., according to EIA figures.
Gross said she worries Russia could cut off gas supplies to European customers in reaction to sanctions.
“I am a bit concerned about Russians playing with natural gas supply to Europe in response to the harsh sanctions,” she said. “Not that I don’t think we should put harsh sanctions on, we absolutely should,” Gross added. “But I think that the folks who may take it on the chin are European gas consumers.”
Russia’s economic fates are tightly bound to those of oil and gas, which it exports heavily to Europe, as Michael O’Hanlon and David Victor, also Brookings researchers, pointed out in January when they pressed for Western nations to sanction Russian oil and gas interests if Russia invaded Ukraine.
“Putin, seeing that the West lacks both a plan and the stomach to cut its dependence on Russian energy supplies anytime soon, thinks he has a strong hand to play,” they said of the Russian strongman, adding that his country supplies more than 40 percent of the European Union’s gas imports.
Still, they noted Russia, the 11th largest economy in the world, is dependent on its energy exports, which make up “nearly 60 percent of all the goods and services the country sells abroad.”
“The West needs to do its utmost to reverse the direction of energy leverage,” they wrote. “Ultimately, Russia needs European markets more than Europe needs Russian gas.”
After months of reticence, the Biden administration levied sanctions against the people and businesses behind the Nord Stream 2 pipeline, which was erected to carry gas from the St. Petersburg area, under the Baltic Sea and to Germany. That country halted its approval of the project Tuesday.
Lobbying firm BGR dropped Nord Stream as a client, Loren Monroe, a firm representative, said in an email Thursday.
“BGR is ending its engagement with the Nord Stream 2 gas pipeline project in compliance with economic and trade sanctions announced by the U.S. government,” Monroe said.
Republicans and fossil energy industry groups, including the American Petroleum Institute, seized upon the invasion to call for loosening domestic drilling restrictions and environmental regulations.
Restrictions on oil and gas from the Biden administration, such as new leasing rules, haven’t shown through in prices for those commodities, Gross said.
“Any constraints he’s put on leasing and that sort of stuff, it hasn’t come through prices yet,” she said. “So stopping doing that won’t make any difference either.”
Kate Ackley contributed to this report.
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