The Biden administration is not expected to target Russia's crude oil and refined fuel sector with sanctions cutting off trade, due to concerns about inflation and the harm it could do to its European allies, global oil markets and U.S. consumers, administration officials told Reuters.
Oil Price Concerns Trump Ukraine
The United States is betting that letting oil continue to flow out of Russia, the world's third largest crude producer, even if President Vladimir Putin fully invades Ukraine, will help keep a lid on global price spikes and help shield U.S. consumers from added pain at the gasoline pump.
U.S. officials are also banking on a vast domestic oil supply - the United States is the world's top producer - and coordinated efforts with allied countries to increase supply will help blunt the impact from the Ukraine crisis.
“Because oil markets are global - and because the United States is an oil-producing country itself - there’s reason to think that ... we'll be able to get through this without too much damage, but certainly it is something that we continue to watch closely," an official, who was not authorized to speak publicly, told Reuters.
U.S. officials have said that a range of oil-related options are under consideration if Russia invades - including pausing the U.S. gasoline tax, tapping the country's strategic oil reserves and restricting its oil exports.
The official said "all options" remained on the table, but gave no details.
“We are still waiting to figure out what exactly those decisions are based on what happens," the official said.
Russia's sprawling energy economy, boosted recently by higher oil prices, represents a potent target for U.S. sanctions like the ones imposed on Venezuela and Iran that restrict sales of crude oil by the OPEC members.
Russian Oil Revenues Up 51% in 2021
But doing so would add to an already tight oil market where prices have soared to their highest since 2014, and lead to potential domestic political problems for U.S. President Joe Biden as he seeks to tame inflation.
Russian oil and gas revenues increased by 51% in 2021, to $119 billion on surging prices, and crude oil accounted for about one-fifth of all exports, the Kremlin said in January.
Even if the United States did impose sanctions on Russian oil, Russia may still find a market. China surged to the top Russian export destination after sanctions were applied after the 2014 Crimea takeover.
As the White House developed the sanctions package with allies in recent months, it tried to avoid or at least minimize negative economic and national security blowback on the United States. Officials considered and were concerned about the possible impacts of a loss of Russian oil supply at a time of rising U.S. gasoline prices, according to a person familiar with the matter.
Global benchmark Brent crude futures have hit their highest since September 2014 and are threatening to breach $100 a barrel. The average price of a gallon of gasoline in the U.S. is $3.53 a gallon, up from $2.64 a year ago.
Biden said on Tuesday that it is "critical" his administration works to tamp down any rise in U.S. gas prices due to the Ukraine crisis.
“I want to limit the pain the American people are feeling at the gas pump. This is critical to me,” Biden said in remarks at the White House.
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