On the morning of March 8, local time, US President Biden announced at the White House that it would ban the import of Russian crude oil and natural gas, increase sanctions against Russia, and strengthen the lethality of the Russian economy. The analysis pointed out that the proportion of U.S. oil and gas imports to Russia is not large, so the ban has less impact on Russia, but this move will further push up gasoline prices in the United States.
With the advancement of the Russian-Ukrainian military conflict, global oil prices have risen all the way, and Western countries have said that sanctions on the Russian energy industry have stimulated the acceleration of oil prices. On this occasion, Buffett has significantly increased his holdings in Western oil company stock. Energy industry companies predict that oil prices may rise further, while financial services firm Citigroup believes that the upside in oil prices is difficult to predict and "likely" has peaked.
U.S. oil prices hit a 10-year high
Some consumers only dare to add a few dollars of oil at a time
After the outbreak of the Russian-Ukrainian military conflict, the United States and European countries announced financial and economic sanctions against Russia, but maintained crude oil imports from Russia. The practice has been widely criticized, and Ukrainian President Zelenskiy has called on the United States and European countries to boycott Russian oil. On the morning of March 8, local time, US President Biden announced a ban on the import of Russian crude oil and natural gas, increasing sanctions against Russia.
Biden has explained that the U.S. reluctance to impose energy sanctions on Russia is to reduce the oil price burden on U.S. consumers. Biden warned that the new ban could raise U.S. gas prices again. Over the past week, the average U.S. gasoline price has soared by 45 cents. The American Automobile Association said it rose to $4.17 a gallon on March 8, breaking the high of $4.10 a gallon set in July 2008.
On March 8, the U.S. was $4.17 per gallon of gasoline, breaking the 2008 record
Because of the wide variability in costs due to fuel supply, taxes, and other factors, the "pain" endured by U.S. state residents is not consistent. For example, the average selling price of a gallon of ordinary gasoline in Oklahoma is $3.72, while in California it is $5.44. Considering that gasoline prices are likely to continue to rise, some drivers plan to fill up additional gas tanks, while others dare to add only a few dollars of fuel at a time to alleviate the cost of living pressures.
"I don't even know if it's worth driving Uber again." Akuwa Taylor, 45, said. According to her, it cost $25 to top up the oil once last December, and now it costs $43. She lost her job in November and started working as an Uber driver. Life has picked up slightly, but the recent spike in oil prices has severely cut her income. "The trickle-down effect is happening to us, and we have to pay for our own business." Taylor said.
In addition, diesel prices, which are critical to U.S. freight fleets and supply chains, are also soaring, adding to anxiety about rising prices of food and other household items. Rising fuel prices will also exacerbate airline distress, with U.S. airlines struggling with billions of federal funding. Now, airlines may pass on those pressures to their customers.
What is the impact of the U.S. ban on Russia?
Analysis: The impact may not be large, and Russian energy is mainly supplied to Europe
Since the United States receives very little oil from Russia, the impact on Moscow is likely to be small. According to the latest statistics last year, the United States imports about 700,000 barrels of crude oil from Russia every day, accounting for about 5% of Russia's oil exports. According to Global Business Intelligence Firm Morning Consult, most of the U.S. crude oil is produced domestically, and most of the crude oil products the United States imports from other places come from Canada and Mexico.
"Biden's decision to ban U.S. imports of Russian oil deserves attention, but given Europe's higher dependence on Russian energy supplies, Europe's ban on Imports of Russian oil and gas is a real blow." Jason McMan, head of geopolitical risk analysis at Morning Consult, said. According to statistics, Europe buys about 4.5 million barrels of crude oil from Russia every day, accounting for about one-third of Europe's total crude oil imports.
Some European countries say they plan to reduce their dependence on Russian energy, but the timeline for getting rid of it is longer. Kwasi Kwautten, Secretary of State for Business, Energy and Industrial Strategy, announced that the UK will phase out imports of Russian crude oil and petroleum products by the end of the year, allowing British businesses to make a smooth transition so as not to affect consumers.
Germany also said it had been working with its allies to develop alternatives to Russian energy, but that "wouldn't happen overnight." German Chancellor Schoelz said: "We have consciously decided to continue our business activities with Russia in the field of energy supply. Dutch Prime Minister Mark Rutte also warned that if countries ban Russian oil and gas too quickly, it could backfire and have "huge consequences."
Buffett has significantly increased his holdings in oil stocks
Agencies are very divergent on the trend of crude oil prices
With the advancement of the Russian-Ukrainian military conflict, global oil prices have risen all the way, and Western countries have said that sanctions on the Russian energy industry have stimulated the acceleration of oil prices. A question that investors now struggle to avoid is: Given the geopolitical risk premium, is crude oil, which has been rising since the bottom of the pandemic, still worth buying?
Recently, Warren Buffett's Berkshire Hathaway submitted information disclosures to the SEC showed that as of March 1, Buffett had increased his holdings in Western Oil, and Buffett held 113 million shares of Western Oil (with a market value of about $6.4 billion). It is reported that the main business of Western oil companies is the extraction of oil and natural gas, and it is the fourth largest oil company in the United States. Western Oil's stock price has been slowly rising since the beginning of the year and began to accelerate after the Outbreak of the Russian-Ukrainian conflict in February.
Berkshire Hathaway's stock price rose, placing Buffett fifth on Bloomberg's list of billionaires
According to reports, in the second quarter of 2020, due to the impact of the epidemic, the futures market also had a negative oil price phenomenon, and Buffett liquidated the shares of Western oil companies in his hands. Now Buffett seems to have calculated the market again, continues to increase the position of oil stocks, oil stocks in the recent sharp surge has also made Buffett return to Bloomberg's list of the world's top five richest people.
However, for the future trend of crude oil prices, various institutions have given different forecasts. Energy industry consulting and research firm Rystad Energy expects Russian oil exports to fall by as much as 1 million barrels per day, while the Middle East has limited spare oil capacity to replace these supplies, and relief measures such as the release of the strategic petroleum reserve will not make up the difference. As a result, oil prices are likely to continue to climb, possibly above $130 a barrel. The commodities analysis team at financial services firm Citigroup said last week that oil prices had "likely" peaked, predicting a sharp drop in crude oil prices over a 6- to 9-month time span.
Red Star News reporter Ding Wen
Edited by Guo Yu
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