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On Tuesday, the Biden Administration announced they would be moving ahead with a ban on importing oil from Russia. The action of imposing such a sanction could have substantial pressure on the Russian economy and encourage other nations to follow suit, but it could also result in retaliatory economic implications on the U.S. and other nations.

At a press conference Tuesday morning, President Joe Biden said, “Today I am announcing the United States is targeting the main artery of Russia’s economy. We’re banning all imports of Russian oil and gas and energy. That means Russian oil will no longer be acceptable at U.S. ports and the American people will deal another powerful blow to Putin’s war machine.”

The price of benchmark oil commodities have been soaring in the past two weeks, and on Tuesday, early trading for both West Texas Intermediate Crude (WTI Crude) and Brent Crude rose by more than 7% on the day, crossing the $130 per barrel barrier. It’s quickly closing in on the all-time high price of $145 per barrel from 2008.

American-based oil companies like Shell and BP have pulled out of Russian oil projects in strength, as well as ExxonMobil, essentially as an act of self-sanctioning in solidarity and support of Ukraine.

The U.S. currently imports roughly 5% of Russia’s oil commodities, down from 8% in 2021. However, it’s not just the vaporizing American imports that will hurt the Russian economy but the expected sanctions from other nations to follow. In total, revenue from Russian oil exports accounted for approximately 43% of the Kremlin’s federal budget in a span of a decade, from 2011 to 2020. Squeezing those revenues would eventually reduce their buying power.

The price for a gallon of regular gasoline has reached national records in recent days with reports of stations posting prices of $5.89 in some areas. As oil prices continue to climb and uncertainty grows, the price can be expected to rise even more. Increasing costs can be anticipated for automotive base oils and synthetics as well.

Threat of economic retaliation from Russia

Elevated gas prices appear to be closely tied to the conflict. Should other nations – European countries, specifically – follow the U.S. lead, Russia has all but promised to turn off the tap for the Nord Stream pipeline running 745 miles (1,200 km) under the Baltic Sea that supplies up to 55 billion cubic meters of natural gas to Europe annually.

More intensely felt worldwide, the price of crude oil could more than double its current highly inflated price, according to a high-ranking Russian official. Russian Deputy Prime Minister Alexander Novak said on Monday, “It is absolutely clear that a rejection of Russian oil would lead to catastrophic consequences for the global market. The surge in prices would be unpredictable. It would be $300 per barrel if not more.”

The issue of oil sanctions on Russia can be complicated and economically straining for many other nations, though. Leaders from other nationsl have said that an immediate trade stoppage on oil wouldn’t be feasible. UK Prime Minister Boris Johnson said, “You can’t simply close down use of oil and gas overnight, even from Russia. That’s obviously not something that every country around the world can do.”

Dutch Prime Minister Mark Rutte made similar remarks, saying, “We have to make sure to deleverage our dependency on Russian gas, on Russian oil, while acknowledging at the moment that the dependency is, to a certain extent, still there.”

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