How Biden’s ban on Russian oil will impact the U.S. and Europe

The U.S. ban on Russian oil adds another level of pressure to a strained global market. The average price for a gallon of gas in the U.S. is now $4.17, and the price of crude oil topped $130 a barrel earlier this week. Daniel Yergin, vice chairman of S&P global and author of several major books on oil and energy including "The Prize" and “The New Map,” joins Stephanie Sy to discuss.

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  • Judy Woodruff:

    Now let's look further at the potential impact of President Biden's move to ban Russian oil in the United States.

    Stephanie Sy is here with some analysis of that decision.

  • Stephanie Sy:

    Judy, Russian oil and petroleum accounts for only about 8 percent of all U.S. energy imports, but the ban adds another level of pressure and stress to a strained global market. The price of crude oil topped $130 a barrel earlier this week. In the U.S., the average price for a gallon of gas is now $4.17.

    We look at the ban's impact here in the U.S., Europe, and Russia with Daniel Yergin. He is the author of several major books on oil and energy, including "The Prize" and most recently "The New Map: Energy, Climate, and the Clash of Nations." He's the vice chairman of S&P Global.

    Mr. Yergin, thank you so much for joining us.

    Since Russia invaded Ukraine two weeks ago, gas prices have gone up 75 cents per gallon. So I want to start with what most Americans are going to be wondering after this ban. How much more pain should consumers expect at that time the pump?

    Daniel Yergin, Author, "The New Map: Energy, Climate, and the Clash of Nations": I think you are going to see at least another few cents' increase, because although the Russian oil is a relatively small amount, it does go into — it helps make some of the refinery operations more efficient, and refiners will be scrambling to find replacements for those supplies.

  • Stephanie Sy:

    Well, let's talk about that. The U.S. gets less than 700,000 barrels a day of oil from Russia, but what does that mean as far as where we're going to get the gap?

    Does the U.S. produce enough? Does domestic supply fill in for that? Does it have to look at other countries, such as Venezuela, for more supply?

  • Daniel Yergin:

    Well, now there's obviously been talks to resume imports from Venezuela to make up for it.

    You can use other grades of oil, but they're just more — harder to process. So, the supplies are around to do it. This is not a major hit, but it is — it just means these systems will not run with the same efficiency because these refineries all get fine-tuned to different grades off of oil.

  • Stephanie Sy:

    When you look at U.S. production, President Biden was keen to point out there are already some 9,000 permits that oil and gas companies have approved to produce more oil and make up for this shortfall.

    Would you expect that the higher prices are going to compel oil and gas companies to start drilling and ramp up domestic production here?

  • Daniel Yergin:

    You know, the 9,000 really doesn't make much sense.

    I think we really need to avoid a blame game here and instead focus on collaboration and cooperation in what is turning into a serious crisis; 9,000 leases out there, first, you don't know if there's any oil there. You have to move equipment there. By the way, it takes a year or so to prepare a well and to drill it.

    And on top of that, the same kind of shortage also that are affecting the rest of the company, of people, pipes and things like that, is affecting the oil and gas industry. We are seeing production going up. And that should have been acknowledged in the president's remarks, go up by almost a million barrels a day.

    But it's not like there's a light switch to turn on to do that. And you don't know until you drill whether there's actually commercial oil there. So that's why I say what we really need is to focus on the practical things that can be done, encouraging production.

    Yes, the U.S. is a signature source of additional oil over the course of the year, but it doesn't happen overnight.

  • Stephanie Sy:

    So, what types of collaboration and cooperation and policy specifically is called for here?

  • Daniel Yergin:

    Well, it's the same kind of cooperation we had in World War II, and the Korean War, and the Suez crisis in 1973, in 1991.

    We need a strong, constructive dialogue between the administration and the industry to understand what's happening in logistics, where the barrels are, where the supply is, how you can fix them, how you can get it into the system.

    The system really needs to work together, and we have got to get out of this kind of contention and argument that we have seen. And we have to regard this as a serious crisis and do what we have done in the past. And we have done it successfully. We have a strong industry. We have a capable government. They have got to cooperate, and there has to be a much stronger dialogue than has existed in the past.

    And I think, here at our CERAWeek conference in Houston, we see that dialogue going on. But we're not going to deal with the problems unless there's really cooperation and dialogue and really tight coordination.

  • Stephanie Sy:

    The U.S. is doing the oil, coal and liquefied natural gas ban largely on its own. The U.K. says it will ban Russian oil by the end of the year.

    But the rest of Europe will continue to be customers of Russian energy. Will that at all, Daniel Yergin, minimize the impact on global oil markets? And you mentioned the commodities as well.

  • Daniel Yergin:

    What's happened is that, already, a lot of Russian oil is actually not getting to market.

    It's being disrupted anyway because of people just — ports in England saying, we won't accept Russian oil. That's happening. Or people can't get insurance to insure a tanker. So — but it is a different situation because Europe has been heavily dependent upon Russian oil, as it is heavily dependent on natural gas. It has alternatives.

    And they're in a different position than the United States is. They don't have the same flexibility we do. And if you remember, the original sanctions, when they were put in place, explicitly carved out oil and gas, so as not to disrupt the flow of energy to Europe, but it's happening.

    And I think European countries are scrambling. They have — one of the things they have turned to U.S. LNG. The U.S. is the biggest supplier of liquefied natural gas to Europe. And in emergency plans that the E.U. came out to replace Russian gas, LNG exports — imports loom large. And the U.S. is going to be the largest export of LNG this year.

    So we have a very important role in helping the Europeans reduce their dependence on Russian oil and gas.

  • Stephanie Sy:

    But, again, they are not part of the ban, so they will continue to get Russian oil. What does that mean as far as how big of an impact the U.S. ban will have on President Putin and his aggressions in Ukraine?

  • Daniel Yergin:

    Well, I think President Putin at this point have demonstrated he doesn't care.

    He doesn't care that he's ruined what he spent 22 years building up, the Russian economy. He doesn't care about the people that he's — that are being killed and maimed and suffering in Ukraine. He doesn't care about his own soldiers being killed. All he cares about is victory and conquest.

    And so he will just look at U.S. banning Russian oil as just another irritant in this strange mental map that he has now that has caused him to launch this war. So — but I think, as more Russian supplies get disrupted — and they are going to get disrupted because banks won't finance them, tankers won't pick up Russian oil, or, if they do, they won't be able to land it — cumulative impact, that this is going to hit his major force of foreign earnings.

    So there are a lot of miscalculations Putin has made, one of which was the dependence of Europe and — on Russian oil and gas would mean that they would have a very passive reaction. It's just had the opposite.

  • Stephanie Sy:

    Daniel Yergin, the vice chairman of S&P Global and author, thank you so much for joining the "NewsHour."

  • Daniel Yergin:

    Thank you.

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