President Biden announced a ban on Russian oil imports on Tuesday, a move that economists said could have small but potentially meaningful domestic economic consequences, pushing prices at the gas pump higher at a time when inflation is already running fast.
“We’re banning all imports of Russian oil and gas and energy,” Mr. Biden said, speaking on Tuesday at a White House briefing. He said the plan would target the “main artery” of the Russian economy.
Russia produces about 12 percent of the world’s oil and 17 percent of its natural gas, according to estimates from J.P. Morgan. While Europe imports far more of its supply from Russia than the United States, energy markets are global, and the mere threat of a ban has pushed commodity prices higher in recent days.
“Prices in some markets like oil already appear to be building in a high probability that further sanctions will be imposed,” Alec Phillips, an economist at Goldman Sachs, wrote in a research note. That was likely to mitigate some of the added fallout from any further action, he wrote.
Economists have consistently noted that the economic consequences of an oil ban will depend in large part on how it is structured. For instance, it would likely make a big difference globally and in financial markets whether the United States pursued the ban unilaterally, or in concert with European partners.
A ban across many countries “would severely reduce and disrupt energy supply on a global scale and already-high commodity prices would rise,” Caroline Bain, an economist at Capital Economics, wrote in a research note, estimating that the price of the global oil benchmark Brent crude would settle in at about $160 per barrel, up from around $125 now. “Energy prices would stay high for longer as it would take time for supply to pick up to fill the shortfall.”
The direct impact on the United States economy of the loss of Russian oil is likely to be less severe. According to the International Energy Agency, the United States imported less than 700,000 barrels per day of oil from Russia in 2021. That represents less than 10 percent of what the United States imports globally.
But if the ban boosts global oil and gas commodity prices and pushes up prices at the pump, that will add to the inflationary pain that is already dogging consumers. Prices are climbing at the fastest pace in 40 years, and data this week are expected to show that the annual increase climbed higher in February.
Rising gas prices will exacerbate that trend. Gas prices hit $4.17 on Tuesday, according to AAA, a new high for regular unleaded gas.
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A gas price of around $4.15 a gallon could push headline Consumer Price Index inflation up by half a percentage point in March, causing it to peak at 8 percent, Ian Shepherdson, an economist at Pantheon Economics, wrote in a recent note.
Higher gas prices also eat into consumer budgets, preventing them from spending on other things — so a ban could also have consequences for overall economic growth.
But consumers are sitting on big cash piles amassed over the course of the pandemic, and since the U.S. produces gas domestically, higher prices could also incentivize companies here to invest and supply more.
“It is risky to assume that the old rule about higher prices depress overall U.S. economic growth still applies,” Mr. Shepherdson wrote.