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US and UK Ban Imports of Russian Oil

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The US and UK announced bans on imports of Russian oil Tuesday as part of international efforts to put economic pressure on Moscow in retaliation for its invasion of Ukraine.

The US announced an almost immediate ban on imports of crude oil, refined petroleum products and LNG.

Russia has already seen a sharp drop in its oil exports. The US move is politically important, but because US energy imports from Russia are modest it will have a limited additional impact.

US companies will be barred from entering into new contracts, while companies with contracts already in place will have a 45-day wind-down period.

Washington also moved to block US companies from investing in Russian upstream projects, extending a limited upstream ban imposed after Russia’s annexation of Crimea in 2014.

Several major oil and gas companies — including US giant Exxon Mobil — have already announced plans to exit Russia.

The UK said it would phase out imports of Russian oil this year and is working closely with the US, the EU and other partners to end “our dependence on Russian hydrocarbons.”

It imports relatively small amounts of Russian oil and gas compared to other European countries. The government estimates Russian oil accounts for 8% of UK demand, with Russian gas making up less than 4% of total supplies.

The EU, meanwhile, is not banning Russian energy imports, but the European Commission announced plans on Tuesday to wean the bloc off Russian gas and diversify its sources of supply.

Pain at the Pump

"The United States produces far more oil domestically than all of Europe, than all the European countries combined," said US President Joe Biden. "So we can take this step when others cannot."

Nevertheless, Biden said the ban would result in additional costs for US consumers in the form of higher prices for gasoline.

"Putin's war is already hurting American families at the gas pump," he said.

That’s because prices for oil and gasoline are set in a global market and there is only limited scope for other countries to increase production to offset the impact of lost volumes from Russia.

The UK government said it had opted to phase out Russian imports gradually to allow “more than enough time to adjust supply chains, supporting industry and consumers.”

It added that it plans to set up a new task force to help companies find alternative sources of supply.

“Businesses should use this year to ensure a smooth transition so that consumers will not be affected,” said Business, Energy and Industrial Strategy Secretary Kwasi Kwarteng.

The UK had already banned Russian ships from its ports on Mar. 1 and authorities were granted new powers to detain Russian vessels.

The war in Ukraine has prompted a revision of the UK's energy strategy, with Prime Minister Boris Johnson promising a plan to expand renewables and domestic oil and gas production.

Russian Reaction

Shortly after the US announced its ban, Russia said President Vladimir Putin had signed a decree banning or limiting the exports of some products.

It said the government would determine within two days which countries would be targeted, and a list of banned products is also expected to be published in due course.

On Monday Russian Deputy Prime Minister Alexander Novak said on Russian television that a ban on imports of Russian oil could push prices to $300 per barrel or more.

He also referred to Berlin’s recent decision to block the start-up of Russia’s new Nord Stream 2 gas pipeline to Germany and said that Moscow would have every right to halt exports of gas to Germany via the existing Nord Stream 1 pipeline in retaliation.

Topics:
Sanctions, Oil Supply, Military Conflict, Ukraine Crisis
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