By Barani Krishnan
Investing.com -- Signed, sealed and delivered: President Joe Biden, with rare support from rival Republicans in Congress and U.S. oil drillers, announced a unilateral American ban on Russian oil and other energy products. His Moscow counterpart Vladimir Putin, meanwhile, promised retaliation.
“I'm announcing the United States is targeting the main artery of Russia's economy,” Biden said.
“We're banning all imports of Russian oil and gas and energy. That means Russian oil will no longer be acceptable at U.S. ports. And the American people will deal another powerful blow to Putin,” he said in the announcement from the White House.
The U.S. ban would add to a raft of global sanctions already imposed on Moscow for its invasion of Ukraine.
Brent, the global benchmark for oil, settled up $4.77, or 3.9%, at $127.98 a barrel, off the session peak of $133.09.
U.S. crude’s West Texas Intermediate, or WTI, benchmark settled up $4.30, or 3.6%, at $123.70, after peaking at $129.40.
Biden acknowledged that European allies might not yet be in a position to join the U.S. in this extra step to exert pressure on Putin. Europe gets 40% of its gas from Russia while America imports about 3% or less of Russian oil.
Biden said the ban was supported by both the Democratic leadership in Congress and rival Republican lawmakers.
Scott Sheffield, chief executive of Pioneer Natural Resources (NYSE:PXD), the biggest U.S. shale oil driller, told the Financial Times that the American energy industry had Biden’s back on the unilateral embargo.
“The only way to stop Putin is to ban oil and gas exports” from Russia from reaching America’s shores, said Sheffield.
But crude prices could go to $150 a barrel, or even $200 if Europe joined the move, the Pioneer CEO warned. To blunt the pain for U.S. consumers, Sheffield even said something he had not suggested for months: that he might seek approval from Pioneer’s shareholders to raise production.
His comments came as the pump price of U.S. gasoline reprised 2008 highs of above $4 per gallon this week.
Sheffield said America needs to add up to 2.5 million barrels daily in production to bring output meaningfully higher and gasoline prices lower. But this cannot be done overnight, he said.
The process will take months, requiring the blessings of each drilling company’s shareholders — who were just earning the dividends they deserved, after losing money for years on shale oil, the Pioneer chief said.
“We’d have to go to our shareholder base and ask what their thoughts are,” Sheffield added.
Back in Russia, Putin wasn’t taking any of this lying down.
Moscow-based news service RIA reported that the Russian president had signed a decree blocking exports and raw materials from Russia of 'certain materials'. The report says the list will be determined in two days.
“All the market moving headlines lately are around Russian imports being blocked from the US, UK and Europe but there's a tail risk that Russia cuts them off from its side.” Adam Button wrote on the ForexLive forum. “If Russia blocks oil and gas exports, the price jump will be stratospheric.”
Button said the order signed by Putin instructed to ensure a ban on the export of products and raw materials from Russia until Dec. 31.