An energy analyst’s advice during Russian oil sanctions: ‘buckle up’

Expect prices for gas, and potentially other commodities, to go up. But those sacrifices could send an important message of defiance to Russia.

By Michael Marks & Caroline CovingtonMarch 9, 2022 12:01 pm, , ,

The ban on Russian oil and gas imports could have a big impact on the Texas economy.

Consumers will feel pain at the gas pump. But the Biden administration’s ban could be an opportunity for oil and gas producers to expand operations in places like the Permian Basin in West Texas.

Daniel Graeber, an independent energy analyst and correspondent, spoke to Texas Standard about some of the impacts on Texans and the economy.

Texas Standard: It makes sense to think this ban on Russian imports might lead to additional domestic production to make up the difference. Should we expect another boom in the Permian and beyond?

Daniel Graeber: I think that depends on investors. I’m seeing commentary out of CERAWeek this week in Houston that the administration is really saying, Well, you know, you have the investors telling you it’s the energy transition that’s behind some of the downplay in U.S. shale activity. But I think this could be an opportunity for U.S. shale to witness something of a revival. And we are expecting new records in 2023 of U.S. crude oil production, according to the U.S. Energy Department.

Does that mean we could see a net benefit when it comes to oil prices?

We have seen $100-per-barrel-oil trigger production in the past. I mean, it’s not the first time that we’ve seen oil prices surpass the $100-a-barrel mark, and that can be an incentive for shale producers to pounce on the market momentum.

Part of the difficulty is with the energy transition, though, that investors are eager to see big oil companies shy away from fossil fuels and move more towards wind energy, which we have down in Texas and elsewhere. So what it is, it is an opportunity. However, it’s really going to be a bit painful for consumers at the pump.

How painful?

Well, it could be an interesting scenario. You know, I was talking to somebody this morning about the way that the COVID has changed our work habits – you know, we have hybrid workforce, we have people working from home, I’m working from home, my wife also works from home. So consumers might not be driving very much.

We could also expect some of this price momentum to be priced in, as most of the Western oil companies were kind of shying away from Russia even before Biden’s announcement, for fear of getting caught with barrels that are untenable.

How much of a difference does this makes for Russia? There are other nations that depend on Russian energy resources much more than the United States that haven’t imposed these sanctions.

We’ve seen shippers turning away from Russian barrels. We’ve seen Shell issue an apology for buying Russian crude, even though the market needs it.

In some respect, in terms of the pain that Russia’s going to feel on the U.S. ban: not very much. The U.S. doesn’t take in a whole lot of Russian crude oil. However, that’s not the case for the European market, which is already struggling over record-high natural gas prices.

What should we do here at home, then? Should we look for alternative modes of transportation?

You could ride your bike, which, probably knowing Houston traffic, you’d probably get to work quicker. But I think it is time to, pardon the pun, buckle up.

Russia doesn’t just export crude oil; it exports wheat and other essential products. And this is going to be a little bit painful. But you know, not to sound cliché, but that might be the price we have to pay to counter this sort of aggression on the European continent.

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