As nations increase economic pressure on Russia. President Biden
has warned that some of those moves could also end up hurting US
consumers, especially at the gas pump. Gas prices are already high,
further pinching consumers who are also dealing with high inflation.
So how big a hit might Americans take in the weeks and months ahead?
William Branham has that story.
Judy nearly a week into Russia's invasion of Ukraine. Global oil
prices reached a peak $113 a barrel. That's the highest price since
2014 in the U. S. The national average for a gallon of gas is now
$3.65. And there are questions now about how high those prices could
go.
As sanctions for Russia's invasion continue to ratchet up for more
on all of this and what might be done to curtail the economic impacts.
I'm joined by Bob McNally. He's the president of Rapid and Energy
group.
Bob McNally. Great to have you back on the news hour. Broadly speaking,
can you help us understand what is driving these prices up? Is this
principally a response to Russia and Ukraine?
You know, it's two things before the Russian attack on Ukraine. Oil
prices had risen sharply up from the $60 to the $90 range, and that
was because
The global oil market is tight, Uh, demand has been quite strong
supply has been lagging. Inventories are low, so that brought us
from the sixties to the nineties. It's the invasion of Ukraine and
specifically the severe sanctions that were announced over the weekend.
That startled the market and put another $10 into the price of crude
oil so that we're now at about 100 and $10. W T.
I mean, the the U. S. And this global coalition seemed to have a
double edged sword here. They want to inflict as much pain as possible
on Russia and Vladimir Putin, but they don't want that pain to boomerang
back onto their own societies.
Can they manage that balance? I mean, what are the levers that the
West and this coalition have to protect their own citizens?
There is certainly trying to do so. So the first thing is to say
we're going to impose sanctions, but not on Russia's oil and gas
exports because those exports are so big that if we do that our own
consumers will see higher prices. So they tried to take pains to
say We're not going to suck sanctioned Russia's oil exports. The
problem is there's uncertainty about that, and traders today don't
want to touch Russian crude.
So that's number one. The second is, as they announced yesterday.
Withdrawal of strategic stocks from the I e a system and that will
help a little bit not too much and taking some of the edge off and
dropping another 60 million barrels into the market.
But the only good option President Biden has really is to call up
Saudi Arabia and you a and asked them to accelerate their production.
He also if he signs the Iran nuclear deal, he'll get another bunch
of oil that way as well. Iran's oil will go by about a million barrels
a day. So those are his real options.
I mean, we saw OPEC plus resist calls thus far for any further oil
supply, the creation of more oil supply. Is it your sense that if
they did pick up the phone to make those calls and exert that pressure
that it would be fruitful?
I think so. I think if the president United States calls up the crown
prince, and he's been reluctant to do so, for understandable reasons,
he's been reluctant. But we're here to do so and put it on the line
if it were not only with Saudi Arabia but you a and say This is a
time to choose. This is a time to help, not only the United States
but your broader consumers from China to Western Europe.
There's a chance they would yes, accelerate their increases in production.
We've also seen major oil companies BP, most notably saying that
they're pulling their investments out of Russia. Will that contribute
to this problem? And will that also be an effective lever? Do you
think against the Russians?
No, that's really a longer term issue. So Exxon pulling out of Sakhalin,
BP Ecuador shall pulling out there pulling out of projects that are
already operating, and they'll do so carefully so that they don't
disrupt production.
This is really something that will hurt Russian production in years
to come. But for now, and for the near coming in the forthcoming
months and so forth, it's not really going to disrupt supplies.
I mean, we are still early days in this and don't really know how
this invasion will play out or how much additional sanctions might
be levied against the Russians. What are you looking towards the
future? What concerns you the most
Well and I do have concerns and I wish I had better news. Unfortunately,
I think crude oil prices and therefore gasoline prices are going
to keep rising until one of two things happens either.
Authorities will make it very clear that Russia is not going to be
blockaded or its oil exports are going to be cut off or President
Putin does it, do it himself, so they have to remove the risk of
that supply.
Or we're going to have a recession. But one of those two things apparently
is going to happen otherwise, oil prices are going to continue rising.
That's just the brutal math of the global oil market.
And I mean, is it your sense? I know you're not a political analyst
per se, but we know that Americans react very badly. When gas prices
go up. We have the midterm elections coming up. I mean, you think
that the president might be put in a situation where his efforts
against Russia
Are really starting to hurt him domestically politically.
That's that's entirely possible. I worked for President Bush. Some
familiar with the political pressures of president is under on energy,
and absolutely he's already under pressure. You know oil prices.
Gasoline prices are up over 10% just since January 67 70% since since
November, so he's under enormous pressure. And I think this is why
President Biden. Even today, the White House announced they're taking
pains.
To try to avoid
restricting Russia's oil exports to they minimize the the hike in
oil prices and the pain on consumers. But he can't control the global
oil market. And it may be that the price of punishing Putin is is
painful himself into the midterms. Certainly
Alright Bob McNally, president of the Rapid and energy group, Thanks
so much for being here.