{"id":5417,"date":"2022-03-11T07:28:44","date_gmt":"2022-03-11T12:28:44","guid":{"rendered":"https:\/\/dahlman.online\/?p=5417"},"modified":"2022-03-11T07:29:10","modified_gmt":"2022-03-11T12:29:10","slug":"russian-oil","status":"publish","type":"post","link":"https:\/\/dahlman.online\/index.php\/2022\/03\/11\/russian-oil\/","title":{"rendered":"Russian Oil"},"content":{"rendered":"\n

Into the Weeds<\/h3>\n\n\n\n

The United States government has banned the import of oil from Russia, as part of the sanctions for invading Ukraine.   Russian oil represents about 7% of the oil imported to the United States.  The United States, though, is a net-petroleum exporter.  So why were we importing Russian oil in the first place?<\/p>\n\n\n\n

First thing to remember, the government of the United States is not the \u201centity\u201d importing oil.  The United States is a capitalist country, and private companies buy oil, not the government.  That doesn\u2019t matter whether it\u2019s imported or domestic, or even oil coming from US Government owned lands.  The United States government does not drill or sell oil.  It does buy some to place in a strategic reserve, but that\u2019s about it.<\/p>\n\n\n\n

It\u2019s About Price <\/h3>\n\n\n\n

The cost of gasoline is getting higher \u2013 setting \u201cworld records\u201d.\u00a0\u00a0There\u2019s no question that Americans are frustrated:\u00a0\u00a0more and more of their income is going into the gas tank.\u00a0\u00a0One factor to consider is that we \u201cgot used\u201d to artificially low gas prices during the pandemic.\u00a0\u00a0Folks weren\u2019t going places, so the supply of gas was high and the demand low \u2013 prices went down.\u00a0\u00a0Then, starting in January of 2021, we began to go back to pre-pandemic life.\u00a0\u00a0Gas demand went up, and prices went right up with it.\u00a0\u00a0That was all happening before Putin invaded Ukraine.\u00a0\u00a0<\/p>\n\n\n\n

Gas prices were already high because of supply and demand \u2013 and then Ukraine happened.\u00a0\u00a0That impacted the world oil \u201cfutures\u201d markets, even before Russian oil was banned.\u00a0\u00a0\u00a0And that\u00a0\u00a0jacked prices up even more.\u00a0\u00a0None of that is attributable to Joe Biden, or even Donald Trump.\u00a0\u00a0The pandemic low was a consequence of a world where fewer people went to work, or on trips, or out to the movies.\u00a0\u00a0Need another example \u2013 check out the cost of an airplane flights now compared to a year ago.<\/p>\n\n\n\n

Russian Oil<\/h3>\n\n\n\n

Why does the US import oil from anybody?  The answer is simple and complicated.  The simple answer is that it\u2019s cheaper to bring Russian oil to the east coast of the United States, then it is to move US oil to the coast from where it\u2019s found.  Moving oil from the Southwest to the Northeast by pipeline is expensive.  Moving it by boat is even more expensive \u2013 especially because of a law that allows sea transport from one US port to another only on US flagged and owned ships,  the Jones Act.   All of the \u201csupertankers\u201d are registered in Panama, to avoid US safety and labor restrictions.  <\/p>\n\n\n\n

And there are only a few places in the United States where a supertanker could actually land to off-load their cargo.\u00a0\u00a0So to move oil from Texas or Oklahoma or Alaska to the northeast United States is expensive.\u00a0\u00a0Refineries in the northeast use imported oil because it\u2019s cheaper than US oil would be.<\/p>\n\n\n\n

Keystone Won\u2019t Help<\/h3>\n\n\n\n

The second thing you\u2019ll hear, is that we could complete the Keystone XL Pipeline from Canada, and have plenty of oil.  There are problems with that as well.  The XL Pipeline isn\u2019t near completion,  only 8% done (Reuters<\/a>). And even if it was, that pipeline is shipping tar sand oil from Canada, the dirtiest oil available.  To refine that into gasoline for cars is expensive, and polluting.  It definitely isn\u2019t a short-term solution to replace banned Russian oil, and it\u2019s not a good long-term solution either, in terms of global climate change.  <\/p>\n\n\n\n

Is it possible for the US to generate more oil production?\u00a0\u00a0Absolutely, though keep in mind the US government doesn\u2019t drill for oil \u2013 oil companies do.\u00a0\u00a0The places where they haven\u2019t drilled for oil yet are more remote and expensive, and will take a while to produce product.\u00a0\u00a0That\u2019s not a short-term solution, and even in the medium term, oil coming from there would cost more to produce, and so cost more to buy.<\/p>\n\n\n\n

But the United States government does have a strategic oil reserve, 714 million barrels of oil kept in salt caverns along the Gulf of Mexico.\u00a0\u00a0(There\u2019s a vision of steel barrels of oil stacked on top of each other, but the oil is pumped into the caverns, not stored in barrels).\u00a0<\/em>\u00a0To gain some perspective, the US uses about 20 million barrels of oil a day, so the strategic reserve is about a thirty-six day supply.\u00a0\u00a0And the US production is about 11 million barrels of oil a day, so with just internal production and the oil reserves the US would last about eighty days (USDoE<\/a>).<\/p>\n\n\n\n

Keep Your Enemies Close<\/h3>\n\n\n\n

So what are the other alternatives?  We could get more oil on the market, by encouraging currently banned countries to produce oil:  Venezuela and Iran.  Of course, that kind of forgives Venezuela for overthrowing their democratic government and installing a dictatorship.  And when the US backed out of the Iran nuclear deal, Iran proceeded to ramp up production of weapons grade nuclear material.  So buying oil from them rewards them for that .<\/p>\n\n\n\n

The \u201dtraditional\u201d American move would be to get Saudi Arabia and the United Arab Emirates to increase oil production to make up the difference and lower world oil prices.\u00a0\u00a0But more oil is not in those countries best interest \u2013 they have oil, and it\u2019s worth more today than it was three weeks ago.\u00a0\u00a0Why should they produce more now, simply to lower the cost?\u00a0\u00a0Where\u2019s the profit for them?\u00a0<\/p>\n\n\n\n

It Ain\u2019t Easy Being Green<\/h3>\n\n\n\n

And one final factor to consider.\u00a0\u00a0The United States is committed to becoming a \u201cclean-energy\u201d nation.\u00a0\u00a0The \u201cshort-term\u201d crisis in Ukraine does nothing to change the longer-term crisis the entire globe faces from climate change.\u00a0\u00a0The number one pollutant is fossil fuels \u2013 coal, gas, and oil.\u00a0\u00a0Reducing our dependence on those fuels is and should be a national\u00a0\u00a0goal \u2013 and will have a short-term cost, whether we do it to hurt Russia, or to protect our children\u2019s future. It’s called “chewing gum and walking” at the same time.<\/p>\n\n\n\n

So banning Russian oil is going to raise prices for every American.\u00a0\u00a0Gasoline, electric power, and even natural gas all have a relationship to oil prices, and those prices will likely go up.\u00a0\u00a0That\u2019s going to push Americans to find ways to conserve and reduce the amount of oil they use.\u00a0\u00a0By conserving, we will take steps towards improving the environment, intentionally or not.\u00a0\u00a0It\u2019s a financial burden, but it\u2019s something Americans ought to do for our children, anyway.<\/p>\n\n\n\n

More importantly, it\u2019s what we can do to support the Ukrainian people, who are suffering for all democracy loving peoples. Frankly, it\u2019s the least we can do for those who are fighting the first battle on the edge of World War III.\u00a0<\/p>\n\n\n\n

 Let\u2019s hope it\u2019s the only one.<\/p>\n\n\n\n

Ukraine Crisis<\/h4>\n\n\n\n