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Motorists feel brunt of United States ban on Russian oil


President Joe Biden this week announced a U.S. ban on all Russian oil, gas and energy imports, noting that the decision will likely drive already record-high consumer prices even higher.

“We’re banning all imports of Russian oil, gas and energy,” Biden said from the White House. “The American people will deal another powerful blow to Putin’s war machine.”

Biden said international economic sanctions in response to Russia’s invasion of Ukraine are exacting a heavy toll on the Russian economy and have already driven the value of the country’s currency—the ruble—down by 50 percent or less than one U.S. penny. Russian energy exports have not, until now, been targeted as part of sanctions. This is due primarily because of Europe’s heavy dependence on Russian energy imports. The oil ban, so far, is a unilateral move by the U.S.

The decision is likely to drive U.S. prices further up at the consumer level. This week, AAA reported the average price of gas in the U.S. had reached an all-time high of $4.17, surpassing the previous high of $4.11 set at the start of the Great Recession in 2008. At mid-week, the average price of a gallon of regular gas in LA County had reached $5.75.

The European Union this week announced it will commit to phasing out its reliance on Russia for energy needs; Russia accounts for one-third of Europe’s consumption of fossil fuels. The U.S. does not import natural gas from Russia. The White House has announced a plan with other world powers to tap 60 million barrels of oil from their strategic reserves to tamp down oil prices. While only a stopgap measure, Energy Department officials believe it could be enough to help stabilize the oil markets for about a month.

“I think people are going to have sticker shock far beyond the gas pump,” said Jeff Lenard, a spokesman for the National Association of Convenience Stores. This group sells close to 80 percent of America’s retail gasoline. He cited the combination of rising consumer demand and the increased costs of the summer blends will contribute to rising prices.

Even before the U.S. ban, many Western energy giants including ExxonMobile and BP had moved to cut ties with Russia and limit imports. Shell, which purchased a shipment of Russian oil last weekend, apologized for the move amid international criticism. Shell has pledged to halt further purchases of Russian energy supplies. A preliminary report from the U.S. Department of Energy shows imports of Russian crude oil had dropped to zero in the last week of February.

California drivers are in a pinch at the fuel pump. West Coast refineries are Russia’s best U.S. customers. Nearly half of Russian oil shipped into the U.S. last year — about 100,000 barrels a day — ended up in California, Washington and Hawaii. The U.S. Energy Information Administration, basically a statistical arm of the Energy Department, reported that California refineries used about 11.3 million barrels of Russian crude last year, followed closely by Washington at 10.4 barrels. A large percentage of the gas refined in Washington is sold in California.

The Energy Department also reported that the amount of Russian oil shipped to the West Coast had been on the rise with refiners such as Marathon and Chevron which this week began replacing Russian shipments with supplies from Venezuela, the Middle East and northwest Europe. Analysts predict that the new foreign oil will demand a higher price as the Russian oil ban further inflames energy markets.

Los Angeles County motorists typically pay more for gas than others because the state requires a unique blend of cleaner-burning fuel made by few refineries outside the state. Higher gas taxes also contribute to the pain at the pump. Further complicating matters is that California’s oil production is down 70 percent–from a peak in 1986–when more stringent regulations against offshore drilling took place. This week, Santa Barbara County supervisors rejected a bid by ExxonMobil to restart an offshore well shutdown in 2015 after a pipeline leak caused the worst coastal spill in 25 years.

At the supermarket, shopping malls and department stores, a growing list of multinational companies–ranging from Apple to Xerox–have announced plans to suspend activities in Russia. A team at Yale University that keeps a list of companies with a significant presence in Russia said about 250 have announced withdrawal from the country since it invaded Ukraine.

McDonald’s will temporarily close 850 restaurants. The fast food giant reportedly gets nine percent of its revenue and three percent of its operating profits from Russia. Yum Brands said its approximately 1,000 KFC and 50 Pizza Hut restaurants in Russia will no longer see any new “investment or expansion.”