The complicated question of ending imports of Russian oil

This is not the position of President Biden, however. Not only has the White House repeatedly declined to halt imports of oil from Russia but the drastic sanctions Moscow has faced since last week’s invasion have excluded the oil and gas industry. In a news briefing Thursday, White House press secretary Jen Psaki offered the administration’s position.

The “factor we’re looking at here is the impact on the gas pump for Americans and reduction of supply in the marketplace,” she said. “A reduction of global supply would have an impact on raising prices. So that’s the prism we look at it through.”

This is a not-uncommon distillation of the debate: righteous annoyance at giving Russia money as it invades an allied state vs. concern about the economic effects of a surge in gas prices. But this distillation, like most distillations, excludes nuance that can help explain the challenge more fully.

In short, ending Russian imports is certainly possible, but it would probably cost consumers more. A key, often overlooked point, though, is that oil is not endlessly fungible, which complicates the picture — and reinforces that reducing dependence on oil overall would help avoid similar situations in the future.

First, the basics.

Russia accounts for only a small part of the United States’ crude-oil imports. In December, the most recent month for which data is available from the Energy Information Administration (EIA), Russian imports of crude oil were only about 1.4 percent of total imports. What’s more, the United States was producing more than 128 barrels of crude oil domestically for every barrel of crude imported from Russia.

If you’ve been tracking this, you’ll notice that this figure seems low: Doesn’t Russia account for something like 8 percent of imports? It does — because crude oil is not the sole component of the petroleum economy.

There are a wide array of oil and petroleum products that are imported to and exported from the United States. Where Russia contributes most is in what’s called “unfinished oil products,” a different category than the crude oil we’re most familiar with. More than half the country’s imports of unfinished oil products — oils requiring further processing, in the EIA’s definition — come from Russia. While this is only a small part of the petroleum economy, about 4.5 percent in December, it’s where Russian imports are most essential.

So the question becomes why we import this oil from Russia and whether we can do without it. For that, we’ll turn to an excellent explainer from the Wall Street Journal’s Collin Eaton. A central factor is that it’s less expensive for coastal refineries disconnected from oil networks in the middle of the country to import oil from overseas.

“The U.S. buys Russian oil in part to feed refineries that need different grades of crude with a higher sulfur content to make fuel at top capacities,” Eaton writes. “U.S. refineries were designed decades ago to use heavier grades of crude, often with higher levels of sulfur, when domestic supplies were lower.” About three-quarters of Russian imports go to refineries on the East and (primarily) West coasts to be refined, he adds.

This is why another point made by Psaki doesn’t precisely capture the problem. She was asked why the administration doesn’t encourage domestic production.

“Well, there are 9,000 approved oil leases that the oil companies are not tapping into currently,” she replied. “So I would ask them that question.”

Since a key problem is that it’s difficult for coastal refineries to get the type of oil they need from domestic producers, increasing domestic production isn’t a panacea.

As Eaton notes, the increase in Russian imports that’s visible on the graph above is in part a function of sanctions imposed against a different country: Venezuela. You can see below the sharp drop-off in imports of oil from Venezuela at the end of 2018 and the subsequent increase in imports from Russia.

The sanctions on Venezuela were feasible in part because there were other suppliers for refiners’ needs. Now one of those suppliers has itself become significantly problematic.

What we’re talking about here isn’t really feasibility but profitability. Despite the lack of pipelines from Texas and Oklahoma to refineries on the East and West coasts, we could ship domestic oil to the coasts, at higher cost. Since the White House’s stated goal is to keep costs down (certainly in part because of the political fallout from seeing prices start to climb again), that is a less appealing option.

But costs are increasing anyway. The price of a barrel of crude oil spiked after Russia invaded Ukraine (as marked by the vertical line on the graphs below). The price of a gallon of gasoline in the United States also rose as the crisis in Ukraine loomed. This despite the lack of sanctions on Russian oil broadly and despite the fact that Russian oil is still being imported to the United States.

The desired outcome of sanctioning Russian oil, of course, is to limit the resources flowing into the regime of Russian President Vladimir Putin. But, again, context. About 60 percent of Russia’s crude-oil exports go to Europe. An additional 20 percent go to China — Russia’s biggest customer and a sympathetic partner in Russia’s current efforts. Limiting imports to the United States would have an effect, but a limited one.

What the situation reinforces is an aspect of fossil-fuel usage that we often gloss over or ignore in these debates: One way to reduce the need to import oil is to reduce the need to use oil at all. As critics of the administration tried to use the Russia situation to criticize Biden’s canceling of the Keystone pipeline (an issue that is also complex), it was hard not to notice that many of them were also advocates of expanding fossil-fuel usage broadly. If we used less oil overall, we’d need less oil — but that is not the desired outcome of the oil industry or of the politicians who support it. Of course, it is also not a good short-term solution.

The question for the administration is whether banning Russian imports is worth the political risk of seeing gas prices increase further. Polling from YouGov conducted for the Economist gives some sense: Less than half the country thinks additional sanctions are worth higher gas prices, though a lot of people have no opinion. There’s not much difference by party.

Polling from The Washington Post and our partners at ABC News found that about half of Americans support additional sanctions even if energy prices (as opposed to gasoline prices) increase, with a wider split by party on that response.

This is the choice. Do we risk further economic damage in the United States in the form of higher energy costs in order to impose additional damage on Russia? Is there political will to bring the war home, even in that microcosmic way? Would the effects be much more than symbolic?

The difficulty of the question is demonstrated by the inability of Democratic leaders to answer it in unity.