The war in Ukraine has given no respite. Both the Ukrainians in the flesh and the rising prices in commodities market around the world are proof of the severity of the conflict between the two former Soviet republics.
On Tuesday afternoon, President Joe Biden confirmed the sanctions on Russia and announced that the United States will no longer import crude oil from Russia, as an additional penalty to the already tough package of measures affecting the Slavic country, which includes the expulsion of several of its main banks from the SWIFT system, restrictions on the import of technology from the West, and on the use of the reserves of the Russian Central Bank.
On Monday, the House Ways and Means Committee and the Senate Finance Committee, agreed to impose a ban on the import of crude oil from Russia. The Biden´s administration sanctions ratify the provisions of these two committees.
How much oil does the United States import from Russia?
Russian oil accounts for less than 2% of the total U.S. crude oil imports. Russia is the world’s second largest producer of oil and, according to the International Energy Agency, is responsible for up to 10% of global supply. In less than a week, the price of a barrel of oil has climbed by more than 20 % and this could get even higher with the imposition of sanctions by Washington D.C.
However, Russia supplies up to 8.98 % of refined oil imports, it is the most important supplier for the United States, after Canada. The sale of refined oil to the United States represents a source of income for the Russian Federation of more than $4.85 billion a year.
In 2021, oil imports from the Kremlin reached a new peak, where they adjusted to 78 million barrels of oil annually. In 2010, the United States imported a record 98 million barrels of crude oil.
How are the sanctions imposed on Russia affecting the price of a barrel of oil?
Although the United States is not dependent on Russian crude oil imports, the sanctions imposed on Russian oil have caused the price of a barrel of crude oil to soar.
WTI crude oil futures are trading at $125 a barrel, while Brent crude has surpassed $128, as a result of the oil shortage caused by the sanctions on Russian crude oil exports. Russian crude, meanwhile, is being sold at a 25% discount premium.
Some analysts estimate that a barrel of oil could even reach $200 a barrel, while the investment bank Goldman Sachs estimates that a barrel of crude oil will average $135 a barrel over the course of the year.
In view of the beginning of the embargo on Russian crude oil, the Organization of Petroleum Exporting Countries (OPEC) together with other producing countries, have decided to increase production for the month of April to 400,000 barrels per day, a significant figure that would help stabilize the price of hydrocarbons in the coming months.
Biden Administration takes a false step with Venezuela
In an apparent misstep, White House Press Secretary, Jen Psaki, confirmed that the Democratic administration has entered into negotiations with Venezuela to lift sanctions on crude oil imports from the Caribbean country and alleviate some of the country’s shortages.
Even if an agreement is reached with the regime of Nicolás Maduro, it is unlikely that the languishing infrastructure of PDVSA — the Venezuelan oil company — will be able to fill the gap left by Russia, since Venezuela went from producing 3 million barrels per day two decades ago, to just over 750,000 barrels per day at the present.