How Ban on Russian Oil Could Hit the US Economy

The attack of Russia on Ukraine has caused a tremendous humanitarian crisis worldwide, especially in European countries. Due to this, every nation is taking action against Russia and is applying bans on its supplies. Recently, American president Joe Biden took a big step and banned Russian oil and gas imports on Tuesday.

Now here the question is, what will be the impact of this on the United States’ economy? Because usually, these kinds of bans cause a lot of distress to the economy of a nation, which causes inflation in the prices of products. So, we will be dealing with this question in detail and reading about all the possibilities this ban will bring.

What is This U.S. ban All About?

According to the reports, there was only 8 percent of oil imports came from Russia into the U.S., which means that America is not dependent on the oil imports of Russia, and taking advantage of this situation, the U.S., along with the European Union, has decided to penalize Russia for its actions against Ukraine by imposing oil-related sanctions.

What Will Be The Impact Of the Russian Oil Ban On the Americans?

The United States produces most of its crude for domestic consumption, but if the global supply of crude oil decreases, the price will rise globally. And this will cause inflation in the price of oil in the U.S, and the prices there will be driven higher. According to the AAA on Tuesday, the price of gasoline has achieved a record of $4.17 per gallon. That breaks the record of $4.10 per gallon that was set in July 2008.

Last month, the price of oil was $90 per barrel. And now, after the ban on Russian oil imports, the prices have driven past $120. And according to the energy analysts, this price can surge up to $200 per barrel for crude oil if sanctions are imposed from Europe or the west. So, this general ban on Russian oil imports can cause huge inflation on the price of oils for Americans, which will also hamper the overall U.S economy.

How Much Oil Does America Imports From Russia?

According to the data produced last year, the United States holds only 8 percent of the Russian oil accounts. In which 5 percent is of Russia’s crude oil exports. On the other hand, Europe heavily depends upon Russian oil, accounting for almost one-third of its crude oil imports.

The U.S imports around 700,00 barrels of oil from Russia, and on the other hand, Europe takes 4.5 million barrels of Russian oil per day. That is because America produces most of its crude oil on its own.

How Will This American Oil Ban Affect Russia?

America imports a very small amount of oil from Russia, so the impact of this ban will be minimal on both nations. But if Europe decides to ban its oil imports from Russia, then it can create a problematic situation for Russia.

The recent announcement of Joe Biden on banning the imports of Russian crude oil is noteworthy, but the attempt of America to cause a European ban on Russian oil imports is a huge step. And The United States is trying to make this happen because Europe is heavily dependent on the Russian energy supplies. And this move of Europe can cause enormous geopolitical and economic ramifications. So Biden is trying its best to work together with Europe and other nations to create an excellent long-term strategy to minimize the dependence of these countries on Russian energies and oils. Biden is trying to replace Russian imports from all the businesses and supply chains.

What Will Happen If Europe Cuts Off Oil Imports From Russia?

Unlike The United States, it will be a callous decision for Europe to put sanctions on the oil imports from Russia. Europe gets around 25 percent of oil and 40 percent of its natural gas from Russia. The price of natural gas resources is already skyrocketing in Europe; putting sanctions on these resources will result in the inflation of prices at the pump.

The Europeans are facing record inflation of 5.8 percent now, and these sanctions will cause significant consequences to the economy of Europe. Thus, it all depends upon how much pain the Europeans can take to stop Russia’s attack on Ukraine.

How Will This Sanction Of U.S. Oil Ban Affect Global Economy?

The U.S. ban on Russian energies and oil is already causing a lot of distress to the global economy. The price of Brent oil has already driven through $130 per barrel, and according to the reports, it can rise to $185 per barrel by the end of this year. Three percent of the world’s economy results from oils, and any increase in the price of oil will affect all kinds of goods, from fertilizers to gasoline. Here we have listed some long and short-term effects of this oil ban.

• Production of oil will rise up- Higher oil prices will also result in the rise of oil production in financially viable countries like Canada.
• Inflation is above 7 percent in the United States and European Union.
• The price of used vehicles and other durable goods will decrease- due to the higher price of oil and gas, employees have slowed down the purchase of used cars and durable goods.
• Employees will opt to do work from home or try to buy a fuel-efficient vehicle.

Conclusion:

The decision of Joe Biden to put sanctions on the imports of Russian oil is a huge step that can punish Russia for its actions against Ukraine. But the attempt of America to partner with the European nations to indulge them in putting sanctions on Russia can bring great ramifications both economically and geopolitically. But this whole game of sanctions can also cause a lot of inflation in the price of natural resources for the United States and Europe. Thus, this can be a very challenging decision for all these nations.