“Global oil prices could reach a ‘stratospheric’ $380 a barrel if US and European penalties prompt Russia to inflict retaliatory crude-output cuts, JPMorgan Chase & Co. analysts warned.” If that’s true, gas prices at the pump could rise by over $6 per gallon, to over $11 per gallon.
Bloomberg News reports:
The Group of Seven nations are hammering out a complicated mechanism to cap the price fetched by Russian oil in a bid to tighten the screws on Vladimir Putin’s war machine in Ukraine. But given Moscow’s robust fiscal position, the nation can afford to slash daily crude production by 5 million barrels without excessively damaging the economy, JPMorgan analysts including Natasha Kaneva wrote in a note to clients.
For much of the rest of the world, however, the results could be disastrous. A 3 million-barrel cut to daily supplies would push benchmark London crude prices to $190, while the worst-case scenario of 5 million could mean “stratospheric” $380 crude, the analysts wrote.
“The most obvious and likely risk with a price cap is that Russia might choose not to participate and instead retaliate by reducing exports,” the analysts wrote. “It is likely that the government could retaliate by cutting output as a way to inflict pain on the West. The tightness of the global oil market is on Russia’s side.”
The U.S. can’t do much to offset any Russian cut in production, in the short run. In the past, it could have released gas from the Strategic Petroleum Reserve. But thanks to progressives, there isn’t enough oil in the reserve now to make a difference. Democrats kept President Trump from expanding the reserve back when oil was dirt cheap. The reserve now is now partly empty, and nowhere near its storage capacity.
In March 2020, President Trump proposed adding oil to the strategic petroleum reserve when oil cost only $14 per barrel (compared to well over $100 per barrel today), but Democrats blocked him from doing that. And rather than adding to the reserve, Joe Biden released oil from it on multiple occasions, such as 50 million barrels in November, 30 million barrels on March 1, and 180 million barrels beginning on March 31.
Critics argued that Biden’s past releases of oil were illegal, because they weren’t in response to an emergency, and left the reserve with insufficient oil to respond to a true emergency. Biden’s actions violated the 1975 Energy Policy and Conservation Act, according to Mark Robeck, the former deputy general counsel of the Department of Energy. The law prohibits releases from the reserve unless there is a severe domestic supply shortage, an act of sabotage or natural disaster. Biden’s “unlawful release of oil from the SPR threatens national security by depleting” the Strategic Petroleum Reserve, Robeck said.
Gas prices in the U.S. have more than doubled since Joe Biden took office. Biden made gas prices rise faster by curbing oil production, making oil more scarce. On taking office, Biden issued a slew of executive actions suspending oil and gas leases.
As the Heritage Foundation observes, Biden earlier took many steps to reduce the supply of oil and gas, which will keep energy prices high and harm industries that rely on inexpensive energy:
At first, Mr. Biden patted himself on the back for his plans to restrict oil and natural gas-based energy. Now that gasoline prices are really taking off, however, he denies that he has slowed domestic oil drilling.
But he has…..On Mr. Biden’s first day in office, he issued an executive order directing the Secretary of the Interior to put a …. moratorium on the Coastal Plain Oil and Gas Leasing Program. That program directs the Bureau of Land Management to lease certain lands in Alaska for oil and gas extraction.
A few days later, he issued another order “pausing” oil and gas leases on all public lands and waters.
According to the Bureau, Alaska’s Coastal Plain is “some of the most highly prospective land on Alaska’s North Slope.” It contains billions of barrels of oil and trillions of cubic feet of natural gas. It is a king’s ransom of energy wealth, and the law requires that the administration make it available for extraction….The result: Mr. Biden has unlawfully trapped much of America’s vast energy reserves behind a wall of bureaucratic red tape, leaving them unavailable now that the country needs them.