What would a US ban on Russian oil mean for the world?

FILE PHOTO: An employee holds a sample of crude oil at the Yarakta field owned by Irkutsk Oil in the Irkutsk Region
FILE PHOTO: An employee holds a sample of crude oil at the Yarakta oil field, owned by Irkutsk Oil Co, in Irkutsk Region, Russia, March 11, 2019. REUTERS/Vasily Fedosenko

March 8, 2022

By Noah Browning, Simon Jessop and Balazs Koranyi

LONDON (Reuters) – The possibility that the United States could ban Russian oil imports has sparked a surge in Brent crude to nearly $140 a barrel, its highest level since 2008.

Russia is the world’s largest exporter of crude oil and oil products combined, with around 7 million barrels per day (bpd), or 7% of global supply. Such a ban would be unprecedented, accelerating already sky-high prices and risking an inflationary shock.

Here are some of the likely consequences of a ban:


Western governments have not directly sanctioned Russia’s energy sector, but some customers are already avoiding its oil to avoid future legal troubles.

JP Morgan predicts oil could hit a record $185 a barrel by the end of 2022 if the disruption in Russian exports lasts that long, although the bank, along with most analysts polled by Reuters, expects an annual average price below $100.

The last time oil prices were above $100 was in 2014, and the levels reached on Monday were not far from a peak of more than $147 reached in July 2008. That’s a steep increase from two years ago, when a coronavirus-induced demand slump saw a barrel of West Texas crude oil fall below $0 as sellers had to pay to get rid of it.

“A prolonged war leading to widespread disruption in commodity supply could see Brent surpassing $150 a barrel,” said Giovanni Staunovo, commodities analyst at UBS.

inflation shock

With natural gas prices hitting all-time highs, rising energy costs are expected to push inflation above 7% on both sides of the Atlantic in the coming months, severely impacting household spending power.

As a rule of thumb, every 10% rise in oil prices in euro terms adds 0.1 to 0.2 percentage point to inflation in the eurozone. Since Jan. 1, Brent crude is up around 80% in euro terms. In the US, every $10 per barrel increase in oil prices adds 0.2 percentage point to inflation.

In addition to being a major oil and gas supplier, Russia is also the world’s largest grain and fertilizer exporter and a top producer of palladium, nickel, coal and steel. Attempting to lock its economy out of the trading system will hit a wide range of industries and fuel fears over global food security.


A ban on Russian oil would further slow the incipient global recovery from the coronavirus pandemic.

Preliminary calculations by the European Central Bank (ECB) suggest that war could reduce euro-zone growth by 0.3-0.4 percentage points this year in a baseline scenario and by 1 percentage point in the event of a severe shock.

There is a high risk of stagflation, or low to minimal growth coupled with high inflation, in the coming months. However, growth in the euro zone should remain robust, even if commodity prices prove to be a drag.

In the US, the Fed estimates that every $10 per barrel rise in oil prices cuts growth by 0.1 percentage point, although private forecasters see a weaker effect.

In Russia, the damage is likely to be large and immediate. JPMorgan estimates its economy will contract 12.5% ​​from peak to trough.


The inflationary impact has already proved too much for the US Federal Reserve, and its Chair Jerome Powell has said interest rates will need to rise this month, adding pressure on borrowers.

For the ECB, the urgency of policy action is less acute as the labor market still has spare capacity and there is little domestic inflation.

“No one can seriously expect the ECB to start normalizing monetary policy at such a moment of high uncertainty,” said ING economist Carsten Brzeski.


As demand for fossil fuels recovers from the pandemic but supply is still tight around the world, policymakers will be under pressure to increase supply despite pledges to support green energy.

“In the near term, there will be a pullback in green initiatives to reverse the decline we are seeing in fossil fuel supplies,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Talks to free Iran from international sanctions are at an advanced stage and high oil prices are expected to spur investment in US shale oil, but supply may not come online soon enough to replace Russian production.

“The potential supply impact is such that there is no quick way to replace them in the medium term, meaning the only mitigation will be price inflation of these inputs and the products that depend on them,” said Alex Collins, Senior Corporate Analyst at BlueBay Asset Management.


The Russo-Western impasse could revitalize Moscow’s ties with Beijing, but energy infrastructure between the two countries is tenuous.

“Although Russia’s Pivot to the East has accelerated gas cooperation with China over gas infrastructure…all these developments are still in their infancy compared to the mature markets in Europe,” said Kaho Yu, principal Asia analyst at risk consultancy Verisk Maplecroft.

Renewable energies could get a boost in the medium to long term as countries try to wean themselves off Russian energy.

“We should put the subsidies that we are now using for natural gas, coal and oil into renewable energy production, electromobility and charging infrastructure for electric vehicles, heat pumps and improving building efficiency,” said Wolfgang Ketter, a professor at the Rotterdam School of Management at Erasmus University in the Netherlands.

“Anything that leads to long-term energy security by reducing dependence on fossil fuels.”

(Additional reporting by Bozorgmehr Sharafedin; Editing by Alexander Smith) What would a US ban on Russian oil mean for the world?

Caroline Bleakley

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