Russian Oil Sanctions Present New Challenges

The world heard it happen on February 24, 2022 — Russia invaded Ukraine and the explosions began. While the internet displayed its support for the war-stricken country in a bevy of blue and yellow posts, the ramifications of Vladimir Putin’s attack began to crawl and claw their way out into the rest of western civilization.

On March 8, 2022, President Joe Biden announced a formal ban on Russian oil imports — a move supported by both Democrats and Republicans that massively disrupted the global energy market. The hidden good news is the full ban does not begin until the end of 2022 to allow time for alternatives to be fleshed out as motorists deal with the 30% surge in oil prices.

A report authored by Robbie Orvis and released by Energy Innovation, a company dedicated to nonpartisan policy and technology, detailed the importance of electric vehicle incentives at this time.

“As a result of incentives for vehicle electrification, we find that by 2027, the amount of reduced U.S. demand for oil would be greater than the U.S. amount of Russian oil demand in 2021, with about half that being achieved within 36 months or in 2025,” Orvis said. “By 2030, the reduction would be more than double the 2021 demand for Russian oil.”

Orvis continued that the only way to be energy secure is to greatly eliminate the need and dependency on fossil fuels by leaning into renewable energy. But the question remains of how that will be achieved and to what degree the earth will feel the imminent impact of energy shifting.

The oft-ignored reality is that U.S. oil dependence on Russia’s imports is minimal, with Canada acting as the primary supplier for the world superpower. An even more interesting reality is that big oil companies are fully permitted to drill and provide oil — but they aren’t — not at the rate most countries need to prevent skyrocketing prices.

The other NATO countries are settling into a lack of a united front on how to handle oil sanctions. Despite that Ukrainian president Volodymyr Zelenskyy has called for an international boycott to support Ukraine as they defensively tackle the Russian invasion; several countries have voiced no immediate plans to cut off supplies.

But it is a ticking time bomb. Once one piece falls, the entire interconnected system will begin to crumble as the world’s third-largest liquid fuel supplier is cut off from exporting its primary resource.

President Biden’s boycott of Russian oil will prove to be more damning than initially thought even though the U.S. only receives about 3% of its crude oil imports from the world’s largest country. The extreme effect it will have on Europe will inherently affect the U.S. since it is a world market.

“Russia’s aggression has cost us all, and it’s no time for profiteering or price gouging,” President Biden said in his announcement. Despite his statement, the effects of price gouging are being felt worldwide, with gas rates at almost $6 a gallon in some places of the United States.

 

While the world begins to scramble for new and renewable resources, the impact of increased prices will be temporary but impactful. Unfortunately, the most immediate answer lies in relying on fossil fuels and expanding the reserves as renewable technologies are still in development. The silver lining is that green initiatives are being ramped up to combat the reliance on crude oils and other fossil fuels.

Enter President Biden’s Build Back Better initiative.

Massachusetts senator Democrat Ed Markey called for a continued ban on Russian oil and passing the climate portion of Build Back Better. The initiative would see $555 billion in spending over ten years to cut greenhouse gas emissions in half by 2030 through tax incentives for low-emission and renewable energy sources.

Some of the investments into renewable power would include solar panels, wind, nuclear energies, and an electric vehicle tax credit of up to $12,500. This action would just be the beginning of the pledge by world leaders to cut emissions and keep global temperatures from rising above 1.5 degrees Celsius as called for by the 2015 Paris Accord.

“In the long run, the way to avoid high gas prices is to speed up – not slow down – our transition to a clean energy future,” written in a fact sheet released by the White House on March 8. “We cannot drill our way out of dependence on a global commodity controlled in part by foreign nations and their leaders, including Putin. The only way to eliminate Putin’s and every other producing country’s ability to use oil as an economic weapon, is to reduce our dependency on oil.  So, even as President Biden does everything in his power in the short term to make sure we can readily access the oil and gas necessary to protect American consumers and allied countries– including through greater U.S. domestic production that is expected to hit record highs next year – this crisis reinforces our resolve to make America truly energy independent, which means reducing our dependence on fossil fuels. This is a shared goal with our European allies, that we will work together to achieve.”

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