Global oil prices rose to new highs on Tuesday after the United States and United Kingdom’s decision to sanction oil imports from Russia.
On Tuesday, President Joe Biden announced the U.S will halt imports of Russian fossil fuels including oil, in an effort to further pressure Moscow to abandon its ongoing war with Ukraine.
“The United States is targeting the main artery of Russia’s economy,” Biden said Tuesday in Washington. “We will not be part of subsidizing Putin’s war.”
In part, the United Kingdom will match the U.S effort by restricting Russian oil imports but it will continue to allow natural gas and coal from the country. Other European nations that rely more heavily on Russian fuels will not participate.
Russian oil made up about 3% of all the crude shipments that arrived in the U.S. last year. When other petroleum products are included, such as unfinished fuel oil that can be used to produce gasoline and diesel, Russia accounted for about 8% of 2021 oil imports, though those shipments have also trended lower in recent months.
U.S. imports of Russian crude in 2022 have dropped to the slowest annual pace since 2017, according to the intelligence firm Kpler.
Biden’s ban applies immediately to new purchases, according to a senior administration official. The U.S. will allow a 45-day period to wind down deliveries of existing orders, the official told reporters. The official asked not be identified as a condition of participation in the briefing.
Biden also banned U.S. investment in Russia’s energy sector, according to an executive order that authorized the Treasury and State departments to implement and enforce the prohibitions.
Biden’s move is a significant step in his sanctions campaign against Russia after its invasion of Ukraine. While so-called self-sanctioning by the oil industry has limited some purchases of Russian barrels, an outright U.S. ban would further weigh on the market and increase volatility.
Biden was already grappling with political fallout from surging gasoline prices even before the invasion. At an average of $4.173 per gallon, the auto club AAA says that pump prices have never been higher according to its records, without adjusting for inflation.
European Dependence
Europe, by comparison, imports about 4 million barrels per day of Russian crude and refined products, according to Eurostat data. Russia was the source of 27% of Europe’s crude oil imports in 2019, according to the European Commission.
Canada’s government announced last month that it intended to ban all crude oil imports from Russia, but the move was largely symbolic. The country hasn’t imported any since 2019.
After experts said the U.S. oil ban was imminent, the U.S. oil benchmark extended gains, rising 7.5% to $128.38 at 10:45 a.m. in New York. The prospect of an oil import ban is helping drive crude to its highest levels since 2008.
Biden acted as Congress was about to move on its own. Legislation to ban Russian crude imports gained traction rapidly among both Republicans and Democrats on Capitol Hill, with congressional staff honing text over the weekend and preparing for a House floor vote as soon as Wednesday.
