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BRITS AND GERMANS PUMP BRAKES ON CALLS FOR RUSSIAN OIL IMPORT BAN: British Prime Minister Boris Johnson signaled opposition to a possible ban on Russian oil imports today, cautioning that such an abrupt cutoff would not be possible “overnight,” even as he expressed support for moving away from Europe’s reliance on Russian energy.
“I think there are different dependencies in different countries, and we have to be mindful of that,” Johnson said at a press conference today. “And you can’t simply close down use of oil and gas overnight, even from Russia––that’s obviously not something every country around the world can do.
“What we need to do is make sure we are all moving in the same direction, and we all share the same assumptions and we accelerate that move, and I think that is what you are going to see,” Johnson said. “But clearly there is going to be a transitional period, we are going to have to look for supply, we are going to have to look for substitute supplies from elsewhere and we are going to have to do it together across the entire coalition of countries that is now condemning Putin’s actions.”
His comments echo German Chancellor Olaf Scholz, who appeared to throw cold water on the idea earlier this morning. In a statement, Scholz said such an abrupt cutoff of supplies could pose a threat to Europe’s energy security.
“Supplying Europe with energy for heat generation, mobility, electricity supply and industry cannot be secured in any other way at the moment,” he said. “It is therefore of essential importance for the provision of public services and the daily lives of our citizens.”
Bloomberg reports that while Scholz acknowledged that the bloc faces an “urgent task” of finding Russian energy alternatives, he said it “won’t happen overnight.” “It’s therefore a conscious decision on our part to continue the activities of business enterprises in the area of energy supply with Russia,” Scholz said.
Meanwhile, efforts to unify the response from the West continue: Biden met virtually this morning with Scholz, Johnson, and French President Emmanuel Macron to discuss the latest developments in Russia and Ukraine, including further coordination on sanctions.
With Europe signaling reluctance for a full-scale ban of Russian imports, the question now is whether the Biden administration––facing mounting bipartisan pressure in Congress––will move to act unilaterally.
Secretary of State Antony Blinken said yesterday that the U.S. is actively exploring the idea of banning Russian oil imports in lockstep with its European allies. Appearing on NBC’s Meet the Press, Blinken said the U.S. is now “in very active discussions with our European partners about banning the import of Russian oil to our countries, while of course at the same time maintaining a steady global supply of oil.” Such discussions, he told CNN’s Jake Tapper, were taking place “as we speak.”
Blinken, who is currently in Europe to help coordinate a unified response to Russia, said he had discussed the ban with Biden and Cabinet officials hours earlier.
Oil prices soared to their highest point since 2008 this morning, with futures for international benchmark Brent crude rising to $139.13 a barrel in early trade before settling at $121.65. Meanwhile, futures for the U.S.-based West Texas Intermediate crude climbed to $130.50, later settling at $117.61.
“We consider $125 per barrel, our near-term forecast for Brent crude oil, as a soft cap for prices, although prices could rise even higher should disruptions worsen or continue for a longer period,” UBS commodity analyst Giovanni Staunovo told Reuters’ Bozorgmehr Sharafedin and Scott Disavino.
Meanwhile, Bank of America analysts told Reuters that, should the West move to cut off most of Russia’s oil exports, “[there] could be a 5 million barrel per day (bpd) or larger shortfall, pushing prices as high as $200.”
What’s at stake: To be sure, EU reliance on Russian energy commodities goes beyond petroleum. Untethering the EU from Russia’s gas supply will also be especially difficult — and costly.
The bloc imports roughly 40% of its natural gas from Moscow, the Wall Street Journal’s Georgi Kantchev notes. “This week, as the West sought to hobble Russia with sanctions, the EU was paying as much as 660 million euros—roughly $722 million—a day to Russia[.]” That’s three times the level before Russia invaded Ukraine.
And should Western allies move to cut off Russian gas exports, it faces few good alternatives, Kantchev writes. Most LNG terminals in Europe are maxed out, and the two new LNG terminals approved by Germany will take a minimum of three years to build. Renewables “would take even longer to make a difference,” analysts said. “This leaves policy makers with unsavory choices if the flows stop, including energy rationing and using more coal, jeopardizing climate-change goals.”
But as Russia intensifies its attack on Ukraine, with troops bombarding major cities, including civilian sites and hospitals, public opinion within the bloc is changing, and quickly. Europe “has become more open to the idea of banning Russian products in the past 24 hours,” Reuters reports, citing sources familiar with the discussions.
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EU MEETING TO REDUCE DEPENDENCE ON RUSSIAN ENERGY: EU leaders are convening Thursday at an informal summit in Versailles to reassess their dependence on Russian energy supplies, Bloomberg’s Ewa Krukowska reports. According to a draft document circulated this morning, leaders “are considering a joint declaration that Russia’s invasion of Ukraine calls for a ‘thorough reassessment of how we ensure the security of our energy supplies,’” though the document is subject to change before the meeting.
Team effort: Asked yesterday whether the U.S. had ruled out a unilateral ban, Blinken demurred, saying only: “A hallmark of everything we’ve done to date has been this coordination with allies and partners. We are much more effective across the board.”
Congress is already on board. House Speaker Nancy Pelosi said in a letter yesterday that the House is exploring legislative options to ban Russian oil imports, and intends to enact this week $10 billion in emergency aid for Ukraine.
Her remarks follow the announcement last week of a bipartisan, bicameral effort to do the same, led by Sens. Joe Manchin and Lisa Murkowski. On Meet the Press, Manchin, who also supports new domestic oil and gas production, reiterated his support for the ban.
“We have the energy, we have the resources here. And we have the technology,” Manchin said.
Support for excising Russian imports is wide-ranging, too, with former UN Ambassador Nikki Haley criticizing the U.S. for its reluctance to ban oil imports: “We need to stop taking any Russian oil,” Haley said yesterday on Fox News’ Sunday Morning Futures. “The idea that we would give our money to an enemy is ‘unthinkable’ and it’s absolute lunacy. We can’t allow this to continue.”
Meanwhile, Democratic Sen. Chris Murphy of Connecticut proposed that the U.S. deploy more renewables to offset any loss of energy associated with an embargo.
“I represent a state that’s going to have a lot of wind power online very soon, and so my preference would be to try to fill in that gap with renewable energy,” Murphy said.
As the White House is learning, you can’t please everyone. Recent events have forced the White House to walk a delicate line as it seeks to limit gas price increases and maintain a steady supply of oil.
As Washington Examiner’s Katherine Doyle explains: “An oil ban would mark a new front in the West’s economic fight against Moscow, building on the crippling economic penalties imposed on Russia’s central bank and financial system with measures to target a sector that accounts for more than one-third of the country’s annual income.” Russia earned roughly $63 billion from international oil and gas sales in the third quarter of 2021, the most recent figures released by the Bank of Russia.
The White House has repeatedly warned that a ban on oil could trigger a sharp rise in gas prices––already nearing record highs––and squeeze global markets. Biden has repeatedly stressed his commitment to protecting consumers from “pain at the pump,” which Democrats know could cost them in the upcoming midterm elections.
But political winds are shifting, and the White House appears to be shifting its sails. Asked last week whether the administration would consider an oil ban, Biden stressed that “nothing is off the table.”
On Friday, White House press secretary Jen Psaki said the administration is “looking at options we could take right now to cut U.S. consumption of Russian energy,” though she stopped short of detailing what that might look like.
“If you reduce supply in the global marketplace, you are going to raise gas prices, you’re going to raise the price of oil,” Psaki added, “and that is something the president is very mindful of.”
PRICES AT THE PUMP KEEP SOARING: U.S. gasoline prices broke the $4 per gallon mark yesterday for the first time since 2008, climbing yesterday to an average of $4.009––a 47-cent spike since before Russia began its invasion of Ukraine. A total of 18 states, including Washington, D.C., are now seeing average prices of $4 or greater.
“This is not the end of it,” Tom Kloza, global head of energy analysis for the Oil Price Information Service, told CNN. “It’s absolutely out of control.”
Kloza told CNN he expects the all-time record for the national average of gas prices to be broken “this week.”
A RECORD DAY FOR EUROPEAN ENERGY: Volatility driven by the Russia-Ukraine war is sending other energy markets to new heights. Futures for natural gas on the Dutch TTF in Europe hit an astonishing $115 per metric million British thermal units today before falling back around $93.
The spike shows the overwhelming extent to which Russia has a grip on Europe’s energy and reinforces the case so many EU and other officials have made for the need to source gas from elsewhere.
A note of comparison: While the conflict is wreaking havoc on the global oil market and spiking U.S. gasoline prices, the domestic natural gas market has been spared largely thanks to U.S. independence when it comes to the energy source.
NYMEX natural gas futures are trading more than 18 times lower than the European benchmark at around $5 per MMBtu today.
The Rundown
Bloomberg News Russian Shelling Destroys Ukraine Atomic Lab Built With U.S.
ClimateWire EV buyers face long waits, price hikes above sticker cost
Politico Inside Olaf Scholz’s historic shift on defense, Ukraine and Russia
AP News Russian war in world’s ‘breadbasket’ threatens food supply
Axios Elon Musk backs more nuclear and oil output to check Russia
Calendar
MONDAY | MARCH 7
CERAWeek kicks off its annual conference in Houston today, with help from U.S. climate envoy John Kerry, who delivered opening remarks. This year’s event––currently in its 40th year––is expected to draw some 4,500 guests, with discussions focusing heavily on energy security and how to transition away from reliance on Russian energy supplies. See the list of speakers and agenda here.
TUESDAY | MARCH 8
10:15 a.m. The Energy and Commerce Committee’s Energy Subcommittee will hold a hearing titled “Charging Forward: Securing American Manufacturing and Our EV Future.”
WEDNESDAY | MARCH 9
9:30 a.m. The House Select Committee on the Climate Crisis will hold a hearing titled, “Confronting Climate Impacts: Federal Strategies for Equitable Adaptation and Resilience”
