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Fallout from Russian Invasion of Ukraine Continues to Rile World Energy Markets

Tim Tarpley, SVP Government Affairs & Counsel

Analysis by Energy Workforce SVP Government Affairs & Counsel Tim Tarpley

On Tuesday, President Biden announced the United States would suspend oil and gas and other energy imports from Russia in response to the continuing invasion of Ukraine. This move will be significant as the U.S. imported more than 20.4 million barrels of crude and refined products a month on average from Russia in 2021, according to the Energy Information Administration. This number makes up about 8% of U.S. total liquid fuel imports. 

The President made it clear during his speech that he felt this action was necessary and that prices would increase as a result. The move had been anticipated since the initial invasion, so many refiners and shippers had already stopped taking deliveries of Russian crude. However the implications on the industry will still be significant.

The debate now moves on to how this gap in U.S. energy supply will be filled. The Administration has been making overtures to Saudi Arabia, Iran and Venezuela to see if they could potentially increase production. Energy Workforce continues to urge the Administration to rely on U.S. production to fill this void, as opposed to new foreign sources. It certainly can’t happen overnight, but with the right policy changes and changes in tone from the Administration, it is possible for the U.S. industry to fill this void. 

Shortly after the President’s announcement, eyes turned to Europe to see whether the EU, which is much more reliant on Russian energy, would follow suit. The UK then announced it plans to ween itself off Russian gas and oil by the end of 2022. The EU made similar statements indicating they will try to expand the use of renewables and other technologies to be fully off of Russian gas by the end of this decade and cut imports by the end of this year by two-thirds. Questions remain as to whether those timetables will be sustainable given the continued escalation on the Russian side. European leaders could likely face increasing pressure to make further cuts or match the U.S. with a full import ban.  

Russia is also continuing to make threats, including stating that any additional help for the Ukrainian side from the Europeans will be considered an act of war against Russia. President Vladimir Putin banned the export of certain commodities on Tuesday and gave his cabinet three days to determine which commodities will be included. It appears unlikely that oil and gas products will be included in this list, but Putin and his spokesman have threatened Europe with that action multiple times, so we will have to see.

In the meantime, the Russian economy continues to spiral out of control, the stock market has been closed for eight days and multiple international companies have chosen to leave the country. ATM’s are dry and the ruble is virtually worthless. Some estimates have speculated that the country could begin to go into default as early as April 1.  

In addition to action by the Biden Administration to address the growing crisis, Congress is aiming to put their stamp on anti-Russia legislation. Even after the Biden announcement of his executive action banning Russian energy imports, House Speaker Nancy Pelosi stated she would move forward with a House version that would make the ban law, including taking steps to remove Russia from the World Trade Organization.

The initial version included provisions that would have removed Russia from normal trade relations with the U.S., however at time of writing those provisions appeared to have been removed. Votes on this package could come as early as Thursday in the House. The Senate has a number of its own packages, so the future of the House bill in the Senate is unclear. It is possible that the Senate could vote on a competing proposal, sending the package to conference.

Striking testimony in the Senate Foreign Relations committee on Tuesday included speculation that President Putin may actually increase violence and aerial bombing in Ukraine. This left many Senators calling for more action. Republicans in both the House and Senate have been urging the legislative packages to include provisions to incentivize U.S. energy production. It will be telling to see if these proposals are able to garner sufficient bipartisan support for inclusion. With the price of oil rising rapidly and midterm elections only a year away, its entirely possible that bipartisan compromise may be reached. 

Developments will likely happen fast in the coming days and weeks, and the Energy Workforce & Technology Council will continue to advocate for common sense energy policies that support domestic production and energy security for the United States. Stay tuned to Energy Workforce communications on this developing issue. 

If you would like to get involved with the Council’s advocacy efforts or the Government Affairs Committee, contact SVP Government Affairs Tim Tarpley.

Tim Tarpley, SVP Government Affairs & Counsel, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.


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