The US has banned the importation of Russian crude oil and natural gas in response to that nation’s ongoing war in Ukraine.
US President Joe Biden issued the ban through an executive order which also prohibits the importation of Russia’s refined fuel products and coal into the US. The order forbids US citizens from financing or enabling any foreign company that is investing in Russia's energy sector.
Though the ban is effective immediately, US officials say US companies will have a 45-day window to allow existing contracts to expire.
“The United States produces far more oil domestically than all of Europe and all the European countries combined. In fact, we’re a net exporter of energy so we can take this step when others cannot,” said Biden. He added that the US is working with European partner nations “to develop a long-term strategy to reduce their dependence on Russian energy as well.”
Biden also spurred US producers to act on the nearly 9,000 drilling permits that they have been granted already. The push from the White House marks a major reversal from its initial position on expanding US oil and gas development.
On Biden's first day in office, he cancelled the proposed Keystone XL pipelinethat would have allowed more than 800,000 B/D of Canadian crude to reach refineries along the US Gulf Coast. The Biden administration also temporarily halted new permits for drilling on federal land, a decision that was later blocked by a federal court.
As the US moved to stop Russian imports, the UK government said it would phase out Russian oil and gas imports by the end of the year. EU officials said they are working on a plan to slash its gas imports from Russia by two-thirds by year’s end and completely wean off Russian energy before 2030.
Europe imports roughly 40% of its natural gas supply and about a quarter of its crude oil from Russia. In 2021, the US imported about 8% of its oil and refined fuel products from Russia with about 3% of that figure representing crude oil, or around 200,000 B/D. This is according to data compiled by the US Energy Information Administration.
The 4.3 million B/D of “Western” crude imports from Russia in January 2022 cannot be replaced by other sources of oil supply in a short period of time,” said Bjørnar Tonhaugen, the head of oil markets at Rystad Energy.
He added that high oil prices are needed “to destroy sufficient demand and incentivize a supply response through higher activity.” This rebalancing of the market might take several months to take shape, said Tonhaugen.
Prior to the US import ban, Russian oil had been suffering from a lack of willing buyers and was trading with discounts of around 25% per bbl.
London-based Shell was met with criticism when it purchased Russian oil last week at a discount that was understood to be more than $28 below the price of Brent crude—marking one of the biggest known discounts on record, according to multiple analysts.
Though the major initially defended the purchase, it backtracked ahead of the US import ban and said it will halt all spot purchases of Russian oil.
“We are acutely aware that our decision last week to purchase a cargo of Russian crude oil to be refined into products like petrol and diesel—despite being made with security of supplies at the forefront of our thinking—was not the right one and we are sorry,” Ben van Beurden, Shell CEO, said in a statement.
He added that the profits from its recent purchase and its remaining volumes of Russian crude will be directed into a fund to support Ukraine. Shell followed BP last week in announcing that it would exit all of its joint ventures with Russian oil companies.
US oil prices bounced up to around $129/bbl during intraday trading but retreated to around $122/bbl by midday; Brent crude futures climbed above $133/bbl before falling to below $128/bbl later in the session.
