HOUSTON (CN) — A group of Republican U.S. senators proposed a bill Wednesday to bar the purchase of Russian oil to prevent the proceeds from funding Russia’s incursion in Ukraine. But the move would be merely symbolic, experts say, in a global market where Russia can find plenty of other buyers for its crude.
The United States is the world’s top producer of oil, followed by Saudi Arabia and Russia. Yet the country relies heavily on Russian imports given the reality of supply and demand.
“The United States consumes roughly 18 to 20 million barrels a day. At most we’re producing a little under 12 million barrels a day. I think the last number I saw was about 11.5,” said Ed Hirs, a University of Houston energy economist.
In 2021, the United States imported more than 245 million barrels of crude oil and petroleum products from Russia, according to the U.S. Energy Information Administration, up 24% from 2020.
With Russian President Vladimir Putin’s forces dropping bombs across Ukraine and amassing for an offensive against the capital Kyiv, U.S. Senator John Cornyn of Texas lamented America’s oil purchases are underwriting the invasion.
“There is absolutely no reason for a country as resource-rich as the United States to be reliant on Russia for oil . . . We should not be financially supporting Russia’s mission to rebuild the Soviet Union, especially when domestic oil production in states like Texas can help provide energy without enriching Putin’s authoritarian state,” Cornyn said in a statement.
Cornyn noted Canada on Monday barred Russian crude imports, though Prime Minister Justin Trudeau acknowledged his oil-rich country, which supplies more than 4 million barrels per day to the U.S., has not imported any Russian crude since 2019.
While Russia can find other buyers to fill the void if it is blocked from the U.S. market, it may have to slash the price, according to Mark Finley, a global oil expert in the Center for Energy Studies at Rice University’s Baker Institute for Public Policy.
Finley said much of Russia’s sales to U.S. refiners are “unfinished oils,” which are “a very low-value byproduct” of Russia’s relatively unsophisticated refining system.
“U.S. refiners have more sophisticated upgrading capacity to turn that byproduct into useful products like gasoline and diesel fuel. That portion of Russian exports (roughly half to total sales to the U.S.) might be a bit harder to sell elsewhere, causing them to offer a larger discount,” he explained in an email.
Russia is the world’s second-largest exporter of oil and supplies 30% to 40% of the natural gas used by the European Union.
So far the wide-ranging sanctions the U.S., EU, the United Kingdom, Switzerland, Australia, Japan and Taiwan have slapped on Russia and its oligarchs aligned with Putin have exempted energy exports, a reprieve analysts say is due to Russia’s importance in the global supply of oil and gas.
Still, the war pushed the price of Brent crude, the global oil benchmark, to nearly $114 per barrel Wednesday, a high not seen since June 2014. And Americans are feeling it at the pump, with the average price of gasoline now at an eight-year high of around $3.70 per gallon, according to GasBuddy.
Hirs, the energy economist, said despite the lack of sanctions against Russian oil exports, banks are leery of facilitating the transactions for oil traders.
“The oil traders who would be buying a lot of that Russian oil out of the North Sea market have a situation where they can’t pay the Russians for it. The banks won’t accept payment, the banks won’t transfer payments,” he said in a phone interview.
“So the money flow for Russian crude has kind of dried up. And with it drying up nobody can buy it. So at least for the time being there’s this temporary buildup of supply probably in Russia that has not made it to market yet. But they’ll find a way to get it to the market. It will be into the black oil market, the same one that Iran trades in.”
If Congress passes the bill to bar Russian petroleum imports it would take effect 15 days later and would exclude shipments already in transit.
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