WASHINGTON – As Russia’s invasion of Ukraine roils global energy markets, Northwest Republicans are calling on President Joe Biden to boost U.S. oil and gas production and impose sanctions on Russian fossil fuel exports in an effort to weaken the Kremlin’s leverage over Europe.
In response to the invasion, the United States and its allies have levied sanctions on Russian banks, state-owned businesses and even President Vladimir Putin himself. But the White House has resisted targeting Russia’s oil and gas industry – which accounted for more than a third of the country’s budget in 2021 – over fears of further disrupting markets already unsettled by the COVID-19 pandemic.
“Russia depends on those revenues just as much as the world needs its energy,” Daleep Singh, Biden’s deputy national security adviser, said Thursday at the White House. “But we’re not going to do anything which causes an unintended disruption to the flow of energy, as the global economic recovery is still underway.”
After oil producers scaled back their operations when demand plummeted in the early months of the pandemic, global supply has struggled to keep up with rising demand, driving prices higher. Fears over the Ukraine crisis made things worse as crude oil prices topped $100 a barrel Thursday for the first time since 2014, up nearly 50% from a year earlier.
Natural gas prices also jumped in response to the invasion. The European Union imports 41% of its natural gas supply from Russia, according to the latest EU data. The Washington Post reported Wednesday the EU plans to unveil a strategy to end its reliance on Russian energy, but such a transition would take years .
Rep. Cathy McMorris Rodgers of Spokane, the top Republican on the House Energy and Commerce Committee, released a statement Thursday calling on Biden “to restore America’s energy dominance,” which she called “our most powerful weapon against Putin.”
“Our allies must not be beholden to aggressors like Putin who use vital resources as a weapon against the West,” she said. “Now is the time for President Biden to flip the switch, say yes to American energy, and aggressively promote America’s energy jobs, production, and exports.”
The United States is the world’s leading producer of both oil and natural gas, according to the latest data from the U.S. Energy Information Administration, but the Biden administration has taken steps critics say hamper oil and gas production, even as environmentalists say they don’t go far enough to combat climate change.
During his first week in office, Biden blocked the controversial Keystone XL pipeline that would have carried Canadian oil to the United States and paused oil and gas leasing on federal lands in the West. His administration has since approved permits for drilling on public lands but delayed those projects again Feb. 19 amid a legal fight with GOP-controlled states.
Rep. Russ Fulcher, a Republican who represents North Idaho, said Thursday he and other Republicans planned to talk with White House officials and urge them to ramp up U.S. fossil fuel production to help European allies reduce their dependence on Russia and take away revenue from Moscow.
“We strongly believe that we have the capacity to eventually fiscally choke Russia,” he said. “If we do it right and we’re smart, we get a double win: We reduce Russia’s ability to finance wars and expansionist policy and we increase our own energy independence and exports.”
David Detomasi, an associate professor at Queen’s University in Ontario and author of a forthcoming book on the geopolitics of oil, said while the United States has the capacity to dramatically boost its natural gas production, “the idea that you can transport enough of that gas to Europe to substantially relieve its dependency on Russia is not plausible at this time.”
While Russia delivers natural gas to EU countries through pipelines, some of which run through Ukraine, Detomasi said delivering liquified natural gas from North America to Europe is limited by relying on ships. On the other hand, he said, U.S. natural gas production can more easily be ramped up or down based on demand.
Randolph Bell, senior director of the Global Energy Center at the Atlantic Council, a D.C. think tank, said the biggest factor holding back U.S. oil and gas production is the market, not the Biden administration. While the federal government could lower taxes or make permitting easier for oil and gas operations, he said, production will only increase when private companies decide it’s worth doing.
“It’s a bit of a political game to say that the Biden administration should make an effort to increase production when there’s actually not much they can do,” Bell said, “and there’s nothing they’re actively doing to prohibit production.”
Despite Biden delaying new drilling on federal land, U.S. oil production rose in 2021, spurred by higher prices. In a Feb. 16 report, the Energy Information Administration projected it will reach a record high in 2023. After decades of importing oil to meet domestic demand, the United States has produced enough oil to be a net exporter since 2018, including in the first half of 2021.
Ellen Wald, president of Transversal Consulting, a global energy consulting firm, wrote in an email there is “no question” Biden’s decision to cancel the permit for the Keystone XL pipeline “hurt American and Canadian energy security,” though she noted the pipeline wouldn’t have been operational in time to affect the current crisis in Ukraine.
“Biden’s energy agenda is a partial cause for high oil prices and sluggish U.S. oil production today,” she wrote, citing the uncertainty caused by the legal fight over drilling leases on federal land. “It is not the only reason, but it plays a role in stifling American oil companies’ exuberance and willingness to invest money in new oil and gas exploration and production.”
Another factor, Wald said, is that because scaling up production costs money and drives oil and gas prices down, companies may prefer to stick with their current production levels and higher profit margins.
In addition to ramping up domestic production, Republicans argue the White House should target Russia’s oil and gas industry as part of a harsher set of sanctions than Biden has announced so far.
“The United States needs to aggressively sanction Russia’s oil and gas activities,” said Sen. Mike Crapo, R-Idaho, who was a key architect of a 2017 bill that imposed sanctions on Russia, partly for its forcible annexation of Ukrainian territory in 2014.
Crapo led a delegation of lawmakers to Ukraine in 2019, including Fulcher, to consider sanctions on the Nord Stream 2 pipeline that would carry natural gas from Russia to Germany. The German government halted that project in response to the invasion, and Biden announced sanctions targeting the company behind it Wednesday.
His fellow Idaho Republican, Sen. Jim Risch, is spearheading new legislation to punish Russia for the invasion, although Risch’s bill does not include sanctions on Russian oil exports.
Bell said the Biden administration is in a tough position as it tries to punish Russia without side effects that hurt Americans, who already are facing higher costs amid the fastest inflation the nation has seen in nearly 40 years. To make restricting Russian oil exports viable, he said, global oil production would need to increase enough to drive prices down.
Wald said sanctioning Russian fossil fuel exports “would cause an immediate spike in oil and gas prices which would cause economic hardship and potentially a recession.” The market would eventually settle down with Russia selling more oil and gas to China and China’s current suppliers in turn selling their products to Europe, but she said “this kind of reorganization doesn’t occur overnight.”
In the longer term, transitioning to alternative energy sources could make Europe less vulnerable to Russia’s energy influence. But Robert Johnston, a senior research scholar at Columbia University’s Center on Global Energy Policy, said gas will remain an important resource.
“The EU is using a lot more renewable power generation which displaces some gas but because of the variable nature of wind and solar, gas remains an important back up source of power,” Johnston wrote in an email.
“Gas is harder to replace in home heating or industrial use so EU governments will likely subsidize prices. As for oil, in the long term, electric vehicles and hydrogen for heavy trucks will displace oil but that is likely to happen only very gradually and will not alleviate the current crisis.”
Detomasi said the Ukraine crisis should be a wake-up call for the United States and its allies that a tight energy market gives countries like Russia leverage they can exert to get their way, perhaps even in war.
“It is a stark reminder of how dependent the world remains on oil and natural gas,” Detomasi said. “The more we have robust, ethically produced oil and natural gas in the world, the less folks like Putin and others can play this geopolitical card.”
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