Even if Russian oil shipments are not interrupted, the United States and its allies could impose sanctions or export controls on Russian companies, limiting their access to equipment, which could gradually reduce production in that country.
In addition, interruptions of Russian natural gas exports to Europe could force some utilities to produce more electricity by burning oil rather than gas. That would raise demand and prices worldwide.
What can the United States and its allies do if Russian production is disrupted?
The United States, Japan, European countries and even China could release more crude from their strategic reserves. Such moves could help, especially if a crisis is short-lived. But the reserves would not be nearly enough if Russian oil supplies were interrupted for months or years.
Western oil companies that have pledged not to produce too much oil are likely to change their approach if Russia was unable or unwilling to supply as much oil as it did. They would have big financial incentives — from a surging oil price — to drill more wells. That said, it would take those businesses months to ramp up production.
What is OPEC doing?
President Biden has been urging the Organization of the Petroleum Exporting Countries to pump more oil, but several members have been falling short of their monthly production quotas, and some may not have the capacity to quickly increase output. OPEC members and their allies, Russia among them, agreed on Wednesday to stick to a plan for increasing production next month by a relatively modest 400,000 barrels a day.
In addition, if Russian supplies are suddenly reduced, Washington is likely to put pressure on Saudi Arabia to raise production independently of the cartel. Analysts think that the kingdom has several million barrels of spare capacity that it could tap in a crisis.
What impact would higher oil prices have on the U.S. economy?
A big jump in oil prices would push gasoline prices even higher, and that would hurt consumers. Working-class and rural Americans would be hurt the most because they tend to drive more. They also drive older, less fuel-efficient vehicles. And energy costs tend to represent a larger percentage of their incomes, so price increases hit them harder than more affluent people or city dwellers who have access to trains and buses.
Article source: https://www.nytimes.com/2022/02/02/business/economy/oil-price.html
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