How will the Biden embargo on Russian oil ‘hurt’ the economy?

On Tuesday Joe Biden has announced a ban on Russian oil imports to the United States, in the latest round of sanctions imposed on Moscow for its invasion of Ukraine. But as energy prices continue to soar and war rages in Ukraine, experts warn that the US president’s historic embargo could lead to even higher levels of inflation and slow economic growth.

Following Joe Biden’s much-anticipated move against the Putin regime, oil prices continued to climb to multi-year highsWest Texas Intermediate crude was up $ 4.30, or 3.6 percent, at $ 123.70 a barrel, reaching $ 129.44 a barrel. Brent crude was up $ 4.77, or $ 3. , 9% to $ 127.98 a barrel.

“Although direct imports of Russian oil make up a small portion of all US imports, the ban will continue to put pressure on oil prices, making it difficult for consumers,” said Lindsey Bell, Ally’s chief marketing strategist.

Several leading economists predict that the US embargo on Russian crude – although widely supported by US public opinion – is likely to exacerbate decades-old inflation and slow economic growth.

Analysts at Goldman Sachs and Bank of America estimate that the impact on consumers from the spike in oil prices will lead to a reduction in US GDP by 0.3% on an annual basis in 2022.

Experts estimate that – in the worst case scenario, where additional restrictions will be imposed on the Russian energy market by effectively isolating it from world markets – oil prices could exceed $ 150 a barrel or even jump to $ 200 a barrel for a large time period.

On Tuesday, the price of gasoline in the US climbed to a new all-time high, exceeding $ 4.17 per gallon (note: the April delivery contract completed the transaction with an increase of 3.1% to $ 3,683 per gallon). If the climate of uncertainty persists, with the war in Ukraine not escalating, and oil exceeding $ 150 a barrel, then analysts warn that the price of gasoline could break the $ 5 gallon barrier.

“The Russian invasion of Ukraine – and the reaction of the West – will widen the gap between supply and demand, which is at the heart of the global inflation rally,” said Jan Hatzius, chief economist at Goldman Sachs. “Rising oil prices are hurting the US economy, which is already overheating,” he said.

“A coordinated ban [στη ρωσική αγορά ενέργειας] “It would be more effective on the part of the West,” said Ethan S. Harris, a Bank of America analyst, in a recent note. – would have a huge impact on Washington’s European allies, who have not yet imposed such a sanction.Europe is heavily dependent on Russian energy imports, in particular, Russian oil imports account for 30% of total In addition, Europe can not easily find alternative sources of supply if trade with Russia is fundamentally shaken.

Already facing heavy economic sanctions from the West – and now the prospect of an embargo on its energy market -, Russia warns oil prices could rise to $ 300 a barrel, if additional restrictions are imposed on it. “The rejection of Russian oil would have catastrophic consequences for the world market,” Deputy Prime Minister Alexander Novak said on Monday, adding that Moscow could close its gas taps to Europe if the West imposed a ban on Russia.

Goldman and Bank of America economists predict “mild” economic effects from the spike in energy prices. However, some analysts are sounding the alarm about a recession in the not-too-distant future. “Economic growth prospects will be hit hard as long as uncertainty remains about the situation in Ukraine,” said Edward Moya, an Oanda analyst. He added: “Inflationary pressures will be strong for much longer than expected. The economy will finally be in recession within the next 24 months.”

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