Price of oil goes higher as US bans Russian crude

Oil prices have pushed higher as US president Joe Biden announced a ban on Russian crude imports following the invasion of Ukraine.

The move tightened economic pressure on President Vladimir Putin. And the UK has also announced that it will move away from importing Russian oil by the end of the year, but Europe has not followed suit.

“We’re banning all imports of Russian oil and gas energy,” said President Biden. “That means Russian oil will no longer be acceptable in US ports and the American people will deal another powerful blow to Putin’s war machine.”

Oil prices in New York rose near $128 (€118.50) a barrel on Tuesday, up another 7.5 per cent after settling at the highest level since 2008 on Monday, though they eased later to about $124. American motorists are feeling the pinch, with the national average petrol price reaching a record $4.17 a gallon.

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In Europe the price of Brent crude went above $130, heaping pressure on retail prices. Fallout from the war has upended markets, driving everything from wheat to nickel and natural gas higher. It has also left the world bracing for an inflationary shock.

Equity markets remained nervous though price changes were not generally dramatic . In Dublin the Iseq index lost another 2.5 per cent. Investors remain deeply concerned about the wider economic impact of soaring oil prices.Oil has rallied more than 30 per cent since the invasion and traders and banks are betting prices will continue to climb. Gas prices have eased slightly, with wholesale prices quoted at about €200 per megawatt hour in late afternoon trading in Europe, still close to historic highs.

Key US politicians announced the outline of bipartisan legislation to bar oil imports into the US, while European Union governments are divided about whether to join the action. While the UK is moving away from oil imports by the end of the year, views remain divided in the EU.

EU leaders are to discuss further sanctions on Russia at a meeting starting on Thursday. Asked about the Irish view on an embargo on Russian energy imports into Europe, Minister for Foreign Affairs Simon Coveney replied that "Ireland is trying to agree with consensus with other countries on how we can maintain pressure on Russia". Speaking in New York he said that Ireland wants to maximise pressure through sanctions. "I do think we will see additions to existing sanctions but it may take a few days to agree that package and unify the EU behind it."

European reaction

Mr Biden said the US decision had been taken in consultation with European allies but said some “may not be in a position to join us”. The US relies on Russia for about 8 per cent of fuel imports, while Russia supplies about 40 per cent of EU gas and up to one-quarter of its oil. German chancellor Olaf Sholz has come out against an embargo on Russian gas, saying it would too disruptive. A new EU commission paper is proposing a strategy to cut Russian gas imports by 80 per cent over the next year.

European Union leaders will also discuss strategies to support consumers and businesses as energy prices soar. In Ireland, some businesses have been put on notice of increases of 50 per cent or more. Cutting excise duties – possibly linked to price movements on the market, is seen as likely, as is support for households. Measures will be inserted in the Finance Bill which is going through the Oireachtas.

Energy prices have soared in recent days in highly volatile markets.US secretary of state Antony Blinken told NBC television over the weekend that the White House is in "discussions" with Europe about the crude ban, sending the market into a frenzy on Monday. Oil had its biggest daily swing ever, with global benchmark Brent surging to nearly $140 a barrel and wholesale gas prices soared worldwide.

Surging oil prices and supply fears are also boosted fuel prices, with diesel futures in Europe and the US touching the highest levels in decades.

Opec secretary general Mohammad Barkindo warned that the world doesn't have sufficient oil-production capacity to replace Russia's contribution to crude markets, according to remarks at energy event CERAWeek by S&P Global in Houston. – Bloomberg