High inflation and rising energy prices amid the economy’s pandemic recovery were already making life more expensive.
Now, a little more than a week into Russian President Vladimir Putin’s war, California has become the first US state to have an average gas price above $5 per gallon.
The average price of diesel is also skyrocketing, which will drive up transportation costs for businesses.
American lawmakers are pushing a bipartisan effort to end all imports of Russian oil and sanction Russia’s energy sector.
That the energy sector has so far been left mostly untouched speaks to the nature of the global energy supply. Russia was the world’s No. 2 oil producer last year, behind the US. A disruption in oil exports would drive up costs everywhere.
Politicians are willing to pay the price. “I’m all for that. Ban it,” House Speaker Nancy Pelosi said this week on Capitol Hill.
“I would gladly pay 10 cents more per gallon,” Sen. Joe Manchin, the West Virginia Democrat, said at a Thursday press conference.
US gas prices are already up more than three times that amount during the course of Russia’s invasion of Ukraine. And energy traders, according to Isidore’s report, are already shying away from purchasing Russian oil due to the war.
Mostly symbolic. For the US, a ban on Russian oil would be mostly symbolic, since very little of the oil used in North America comes from Russia.
Sanctions by the US and other countries to stop Russian exports around the world would be much more costly, especially in Europe, which is fueled by Russian oil.
I asked CNN’s polling director, Jennifer Agiesta, how Americans would react to a protracted hike in gas prices. She offered these thoughts:
What price increase will Americans accept? As the fighting continues and the prices creep higher, two things to watch for in polling are:
- How much of an increase the public is willing to accept, which can vary based on the tradeoff the public is being asked to make, and
- Whether the broad support for sanctions that polling finds now drops as gas prices rise.
The Iraq invasion example. Back in August 1990, amid the Iraqi invasion of Kuwait, a USA Today survey found that most Americans were willing to pay higher gas prices in order to institute a ban on Iraqi oil, but there wasn’t universal agreement on how much was acceptable:
- 21% were willing to pay 25 cents more per gallon (about the equivalent of 53 cents in today’s dollars).
- 16% would pay an additional 50 cents per gallon.
- 5% would be 75 cents more, and
- 27% were willing to accept an increase of $1 or more per gallon (at least $2.14 in today’s dollars).
But people can’t always predict how they’ll react to hypothetical future events, so watching whether the high American support for sanctions holds over time in the face of increasing gas prices will also be a critical indicator.
But there is a key difference today. The US is less reliant on oil and cars.
“Until workers start losing jobs, higher oil prices may be more of an annoyance than a game changer for the economy that leads to a crippling recession,” La Monica writes.
Value meltdown in Russia. In the US, the direct effects of Russia’s war on Ukraine might be frustration to people filling up their cars, for now. But the economy of Russia is taking a very real hit — despite the fact the West has so far not directly sanctioned energy exports, the main driver of its wealth.
Turns out yacht ownership is difficult to trace. On Wednesday, the French seized a yacht it says belongs to Igor Sechin, a sanctioned Russian oil company executive and Putin ally. A management company denied he was the owner.
For all the financial ramifications in Russia and the US, the US is steadfast in its pledge to not join the military fight in Ukraine.
To put the current state of international affairs in the most terribly brutal realpolitik terms: Is Ukraine worth the possibility of involving the United States and Russia, two nuclear powers that could destroy human life on earth, in a shooting war? And are the risks to their citizens and the world worth keeping Putin out of Ukraine?
These questions do not consider the morality of allowing a smaller country to be swallowed by a larger one, or a democratic one to be crushed by an authoritarian one. But that is the whole point of realpolitik.
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