The ongoing conflict between Russia and Ukraine has caused major complications for the global economy. The most visible impact in the US is the ever-increasing price of gas and diesel. Due to the act of aggression caused by Russia, countries like the US have imposed sanctions on Russian oil in hopes to hinder Russia’s economy. But sanctioning Russian Oil came with consequences including the rising price of gasoline due to oil shortages. Can the US solve its oil crisis without using Russian Oil or is the solution not in the hands of the US government?
To understand the problem at hand, one must first understand why Russian Oil is so crucial to the global oil supply. Russia is one of the largest oil exporters in the world and accounts for 11% of the global oil supply. According to CNN, “In 2021, Europe got 60% of Russian oil and China got 20%”. Very little Russian oil is imported by the United States. Oil is priced on the global commodity market and any disruption in the global commodity market will impact oil prices worldwide. Due to the sanctions on Russian oil, Europe lost almost a quarter of its oil imports which increased prices rapidly. With the price of gas increasing all over the world, how will the US cope with this rapid increase in gas prices?
One of the measures announced by the United States is the removal of the gas tax. According to CNN Biden says “I fully understand that a gas tax holiday alone is not going to fix the problem,” he said. “But it will provide families some immediate relief, just a little bit of breathing room as we continue working to bring down prices for the long haul”
Before the gas tax holiday, every time you purchased gas you would be taxed 18-24 cents per gallon. By removing this tax, Biden is hoping to provide some temporary relief for families. This move will cost the US roughly 10 billion dollars. Despite the gas tax holiday, prices at the pump seem to still be increasing.
The second method the US is using is to release gas from the oil reserves.
According to CNBC “President Joe Biden plans to tap the nation’s Strategic Petroleum Reserve for the next six months as domestic producers ramp up production, according to a fact sheet released by the Biden administration.”
The strategic petroleum reserve, also known as SPR, is an emergency stockpile of petrol created by the US in 1975. The SPR underground tanks in Louisiana and Texas can carry 714 million barrels of oil. The White House has announced that they will use 1 million barrels of oil from the SPR every day. They will do this for 6 months at which time domestic producers will ramp up their production.
The United States is slowly combating the creeping prices of gas using various different methods. None of these methods are permanent because rebalancing supply and demand takes time. The reality is the world is still very much dependent on Russian energy sources and cutting off supplies will have long term consequences for most of the world. In order to avoid such situations in the future, the United States should find reliable alternative energy sources.