Americans will feel some pain.
So far, the war and the sanctions imposed on Russia have had little domestic U.S. impact, certainly compared to the suffering in Ukraine, or Russia for that matter. The most significant domestic burden has come through the rising cost of energy. Especially lower-income Americans will feel the hardship in their daily commute, in heating and soon cooling their homes, and in the cost of everything that requires shipping.
The U.S. energy price response has been striking to say the least. In just the weeks since Russia invaded and the sanctions went into effect, the price of gasoline at the pump has soared by more than 25% from a national average of $3.28 to $4.11, a record. The price of a barrel of crude oil has risen 15% and the price of natural gas has jumped almost 14%.
The extent of the price jump no doubt surprised Washington. The sanctions, though severe in many respects, pointedly spared Russian energy supplies on world markets. There was no mention of oil and gas in the original sanctions announcements. These all focused on Russian finance and purchases of technologies. Even when casting Russia out of the SWIFT communications network for global financial transactions, the United States and its allies carved out an exemption for the sale of Russian energy.
Despite official exemptions, problems immediately arose getting Russian supplies to consumers. Carriers were reluctant to take Russian cargos and some insurers refused to cover them. Unofficial sources suggest that whatever the allowances in the sanctions regime, some 70% of Russian oil and gas cannot find a destination. At the same time, consumers of oil and gas around the world, including in the U.S., went into something of a frenzy of pre-ordering and hording.
Matters would have been less stressful had the Biden administration not already shut down a significant portion of North American energy production. On Biden’s first day in office, he interrupted the potential flow of Canadian oil to market by closing the Keystone XL Pipeline. For the last 14 months, executive agencies have at every turn discouraged both conventional drilling and fracking. According to the Energy Information Administration, domestic U.S.
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