ALEXANDRIA, Va.—U.S. President Joe Biden today announced a ban on U.S. imports of crude oil, natural gas and energy from Russia in response to Russian President Vladimir Putin’s continued war on Ukraine.
“We will not be part of subsidizing Putin’s war,” Biden said in comments this morning at the White House. “This is a move that has strong bipartisan support in Congress, and I believe the American people.”
Russian oil and refined products account for about 8% of U.S. imports of oil, or about 672,000 barrels a day, according to EIA data. Europe is Russia’s biggest market for its oil and natural gas imports. The European Union today pledged to cut by two-thirds its imports of Russian natural gas by year’s end and reduce its dependence on Russian fossil fuels before 2030.
“We are a net exporter of energy,” Biden said. “We can take this step when others cannot. Our teams are actively discussing how to make this happen. And today we remain united in our purpose to keep pressure mounting on Putin and his war machine.”
Biden cited his previously announced authorization of release of oil from the strategic petroleum reserves, in an effort to “minimize Putin’s price hike here at home” as the cost of gasoline surges.
The U.S. president acknowledged energy firms pulling out of Russia but issued a warning about pricing.
“To the oil and gas companies…it’s no excuse to exercise excessive price increases or padding prices to exploit this situation,” Biden said. “It’s no time for profiteering or price gouging.”
Biden also deflected criticism that his administration’s policies are crimping U.S. oil and gas production, calling it “simply not true.”
At the same time, he touted the need to electrify the vehicle fleet and said, “This crisis is a stark reminder to protect our economy. Over the long term we need to become energy independent. It should motivate us to accelerate a transition to clean energy.”
In trading today following Biden's announcement, WTI crude oil was at $128.28 a barrel, while Brent crude, the international benchmark, was at $132.75 a barrel, CNBC reports. Global oil futures hit as much as $139 a barrel this week, reports Reuters.
Consumers are paying 47% more than a year ago to fill up their cars, and energy executives at the CERAWeek energy conference in Houston said that gas prices are now getting to the point where consumer demand will decline. The national average price for a gallon of regular gasoline climbed to $4.173 today, topping the prior record of $4.114 a gallon set in July 2008, according to AAA.
Energy price shocks could quickly "get to a point where people are going to make decisions not to use the product because they can't afford it," Andy Brown, chief executive of Portuguese energy firm Galp Energia, told Reuters. "There is a chance we get demand destruction.”
Demand destruction is a sharp downward drop in demand for oil or another commodity. It can be triggered by things like fast-rising fuel prices or a pandemic, for example.
“As it currently stands, demand destruction is the only thing that could cool off prices,” Denton Cinquegrana, chief oil analyst, OPIS, told TransportDive. “There’s not much you can do if the economy is growing.”
(Cinquegrana will present his outlook for fuels at the NACS State of the Industry Summit April 12-14 in Chicago.)
“If energy prices continue to skyrocket, we will see significant inflationary pressure that will in turn lead to potential demand destruction,” Brigham McCown, founder of energy trade group Alliance for Innovation and Infrastructure, and the former head of Alaska's Alyeska Pipeline, told Reuters.
"I don't think that's overnight, but clearly within the next couple months, yeah, our economy is going to take a significant hit," McCown said.
Shell to Exit Russia
Shell announced today that it is withdrawing from the Russia oil and natural gas business altogether, including closing its gas stations in the country and shutting down its lubricants and jet fuel operations. The energy giant said it would stop buying Russian crude oil on the spot market and won’t renew term contracts.
Today’s announcement follows Shell’s decision last week to exit the Nord Stream 2 pipeline project and end its equity partnerships with Gazprom and related entities. Shell’s purchase last week of a cargo of Russian crude oil drew criticism from Ukraine, reports Reuters.
“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,” Shell CEO Ben van Beurden said in a news release.
“As we have already said, we will commit profits from the limited, remaining amounts of Russian oil we will process to a dedicated fund. We will work with aid partners and humanitarian agencies over the coming days and weeks to determine where the monies from this fund are best placed to alleviate the terrible consequences that this war is having on the people of Ukraine.”
Couche-Tard Halts Russian Operations
Alimentation Couche-Tard announced that the company is immediately suspending operations in Russia and implementing plans to take care of its employees in a “responsible and safe manner.” In Russia, Couche-Tard has operated under its primary brand Circle K including over 320 employees and 38 stores located in St. Petersburg, Murmansk and Pskov.
“We condemn Russia's aggression against Ukraine and the huge human impact it is having for both Ukrainians and Russians,” Brian Hannasch, president and CEO of Couche-Tard, said in a news release. “As such, we have made the decision to suspend operations. Couche-Tard has had stores in Russia for nearly three decades, and we are proud of our Russian team members and their dedicated service to local customers and communities."
Couche-Tard has already donated more than $1.5 million to the Red Cross and has created a global campaign to raise additional funds for the Ukrainian people. Since the beginning of the crisis, local Circle K teams in Poland, the Baltics and across the European network have been supporting refugees with free fuel, food and beverages, housing and donations to children’s charities, the Canada-based company said.
Yum! Brands Stops Projects in Russia
Separately, Yum! Brands said it is halting all of the company’s restaurant development activities and investments in Russia. The company also plans to redirect profits from existing restaurants in Russia to humanitarian efforts.
Yum! Brands has about 1,000 KFC restaurants and 50 Pizza Hut locations in Russia, and nearly all are operated by independent owners.
In a news release, the company said the Yum! Brands Foundation is donating $1 million to the Red Cross to support those affected by the crisis, is activating the Yum! Disaster Relief Fund to support Ukrainian franchise employees and is matching donations from employees to the following charities providing relief in Ukraine: UNICEF, Red Cross, World Food Programme and International Rescue Committee. In addition, Yum!’s franchisees in the surrounding region are providing support to refugees.
Lukoil Backlash in U.S.
New Jersey governor Phil Murphy said that the state is thinking about taking action against Lukoil gas stations, CNBC reports.
However, Jeff Lenard, NACS’ vice president of strategic industry initiatives, says that the trouble with the anti-Lukoil sentiment is that most of the stations are operated by American business owners under lease.
“People are angry and people should be angry, but you’re not going to punish Russia to the level you think you are,” Lenard told the Philadelphia Inquirer. “Russians may own the Lukoil brand name and actually collect something from the sales at these various retail outlets, but the outlets themselves are really owned by independent businesspeople.”
The New Jersey Gasoline, C-Store, Automotive Association (NJGCA) said in a statement Friday that attempts to damage the global Russian oil majors are hurting American small business owners, some of whom didn’t chose to be associated with Lukoil.
Sal Risalvato, NJGCA executive director, said “most if not all of the Lukoil stations found in this state are not being managed or operated by the Russian Lukoil corporation, but by individual franchisees, who have signed multi-year contracts to operate these locations.” Risalvato said. Many of the franchises were originally Getty or Mobil locations that Lukoil acquired. “Even the actual gas that they buy wholesale comes from U.S. suppliers,” Risalvato said. “Lukoil just slaps their brand name on it."
The NACS Fuels Resource Center provides context around fueling issues, including the backgrounders Convenience Stores Sell the Most Fuel and How Gas Is Priced.