What Europe’s ban of Russian oil could mean for energy markets – and your gas prices – NPR

by | May 4, 2022 | Energy

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A gas pump is seen at a Shell gas station in Houston on April 1.

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Brandon Bell/Getty Images

It’s going to get even more volatile in energy markets – and hence for gasoline prices. Crude prices jumped on Wednesday after the European Union proposed a ban on oil imports from Russia as part of a new round of sanctions targeting the country after its invasion of Ukraine. The details are still being hammered out, and the proposal needs to be unanimously agreed upon by the 27 members of the bloc before going into effect.

Brent crude, the global benchmark for oil, jumped more than 4% on the news and was trading at around $110 a barrel. Here’s what the proposed EU ban could mean for global oil markets and gasoline prices in the U.S. How much impact will there be on oil markets? Crude prices will likely go even higher still after already surging following Russia’s invasion of Ukraine. Europe is hugely dependent on Russian oil imports. It gets about a quarter of its oil from Russia, by far the biggest single source of oil imports into the continent.

Though Russia could find other buyers like India for the crude, it’s unlikely that Russia will be able to sell the entire allotment that would usually go to Europe. Heavy sanctions have made some traditional buyers reluctant to deal with Russia. And as part of its latest proposal, the EU is also seeking to ban European ships from transporting Russian oil. Ultimately it’s expected that an EU ban on Russian oil imports will result in a loss of 2 million barrels a day from Russia.

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European Commission President Ursula von der Leyen making a statement in Brussels on April 27 following the decision by Russian energy giant Gazprom to halt gas shipments to Poland and Bulgaria.

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Kenzo Tribouillard/POOL/AFP via Getty Images

In fact, the U.S. has been urging Europe to be cautious when the region was considering its oil ban given that Russia could make up the loss of revenue from sales to the EU through higher crude prices. There are factors that could contain oil prices, however. Lockdowns in China to deal with an outbreak of Covid-19 cases are expected to reduce global demand for crude, though it’s hard to say how long the measures will last. What does the EU ban mean for gasoline prices? European citizens will be hit hard for sure, but even in the U.S., it’s hard to see any relief in sight to gas prices. After all, what consumers pay at the pump is most directly affected by the global price of crude.
When the price of oil spiked following Russia’s invasion of Ukraine, the average price of gasoline in the U.S. shot up above $4 a gallon and has remained there since, according to data from the American Automobile Association. The U.S. is also approaching the summer season, when traditionally more people take to the road.

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