Oil Surges To $139 A Barrel As Biden Weighs Russian Bans

Oil prices surged Sunday night, hitting $139 per barrel on word that western allies were moving toward a ban on imports of Russian oil.

It’s a big reversal from a few days ago, when the Biden administration said it had no intention of blocking petroleum supplies if it meant inflicting financial pain on consumers.

Perhaps that’s too late; the price bump implies gasoline prices of $4.55 per gallon, and according to Patrick De Haan of Gas Buddy, American motorists are paying $250 million per day more for gasoline than a month ago.

It’s likely any official U.S. ban on imports would need support of Congress. On Friday, House Speaker Nancy Pelosi expressed her support.

Many typical buyers of Russian oil have already gone on strike. Shell bought a cargo of Russian oil late last week, reportedly for a deep discount of nearly $30/bbl – then the oil giant spent the weekend defending itself.

Already diplomats are desperately scouring the globe looking for replacements to Russia’s 8 million bpd of exports – 5.5 million of which go to wealthy nations.

The Biden administration has reached out to the Maduro regime in Venezuela – a Russian client state – seeking to rebuild a diplomatic relationship, and beg for more oil, while Moscow is distracted.

Senator Marco Rubio tweeted his disapproval that the “Biden Admin thinking they are going to pull Venezuela away from Russia by reaching out to the Maduro regime is a reminder that many of our so called career ‘foreign policy experts’ are stupid people.”

Word also came over the weekend that U.S. negotiators were close to a new nuclear deal with Iran (brokered by Russia) that could soon return Iranian oil to the market and send Iran’s stockpile of highly enriched uranium to Russia for safekeeping.

And if that weren’t enough, Biden is reportedly contemplating a state visit to Saudi Arabia where he would seek to repair a diplomatic relationship tarnished by Biden’s unwillingness to meet with brash, visionary heir apparent Crown Prince Mohammed bin Salman. According to an interview in The Atlantic, the prince appears to be offended that Biden still thought King Salman, 86, was still in control of the kingdom. The Saudis and UAE are believed to be the only big oil producers that could meaningfully open the spigots on short notice.

From The Atlantic: We asked [MbS] whether Biden misunderstands something about him. “Simply, I do not care,” he replied. Alienating the Saudi monarchy, he suggested, would harm Biden’s position. “It’s up to him to think about the interests of America.” He gave a shrug. “Go for it.”

It’s almost comical the efforts the administration is suddenly taking to find more international oil. Especially considering the laundry list of antagonisms the administration has shown toward the domestic industry.

Biden campaigned on a pledge to ban hydraulic fracturing on federal lands; killed off permits for the Keystone XL pipeline on his first day in office. Carbon czar John Kerry has been pushing a net-zero banking alliance, many members of which won’t do business with fossil fuel producers. Kerry also last year encouraged oil workers to get jobs making solar panels.

But in October, an administration spokesperson said “we are using every tool at our disposal to address anti-competitive practices in the U.S. and global energy markets.”

Meanwhile, gold is closing in on $2,000 an ounce while aluminum is up 150% since pandemic lows, with analysts at Wellington Management forecasting worldwide shortages of the metal as stockpiles run out in 2024. Of even greater concern is the explosion in wheat futures. Russia and Ukraine harvest more than a quarter of the world’s wheat, which has ramped 50% in price this year, to more than $12 per bushel — levels not seen since 2008. For the past four trading days trading in wheat futures has been halted in minutes after jumping limit up 7%.

Recall that the Arab Spring revolutions began in Tunisia in 2011 after food prices jumped 20%.