U.S. President Joe Biden signed an executive order on March 8 banning the import from Russia of crude oil, certain petroleum products, LNG and coal, sending the price of gasoline in the United States soaring.

Since the executive order, the average price for a gallon of gas in the U.S. is now $4.17, up from $3.48 a month ago. The price of crude oil topped $130/bbl earlier this week but has since fallen back below $110/bbl.

Still, what are some near-term implications for U.S. importers from the ban on Russian oil?

“We expect to see a period of adjustment in the supply chain, as U.S. importers rush to conclude importation of previously purchased products prior to the April 22 deadline and make plans to divert shipments that will not reach U.S. in time to meet that deadline,” Barbara Linney, international trade team co-leader with law firm BakerHostetler, told Hart Energy.

Effective April 22, import of Russian-origin crude oil, petroleum, petroleum fuel, oils, and products of their distillation, LNG, coal, and coal products will be prohibited, Linney explained.

In addition, she noted that banned effective immediately are new investments by U.S. businesses in the energy sector of the Russian Federation, as well as any U.S. person's approval, financing, facilitation or guarantee of such investments. The Office of Foreign Assets Control (OFAC) has clarified that new investments include a range of transactions, including loans or other extensions of credit.

From a legal compliance perspective, Linney advises oil and gas companies to implement policies and procedures designed to ensure compliance with both the import ban and the ban on new investments.

“These policies and procedures should include a methodology for identifying Russia-origin products subject to the import ban as well as the type of transactions that are subject to the ban on new investments,” Linney said.

Companies should also continue to monitor developments to ensure their policies and procedures reflect the most current OFAC guidance and additional legislative or other actions that may be taken by the U.S. as the situation on the ground in Ukraine continues to change, she said.

Market impact

From a supply perspective, in the near term, all eyes will be on OPEC’s output, strategic stock releases and a potential return of Iranian crude to meet the shortfall in global supply, according to an Enverus report published March 10.

“Beyond a year, short-cycle U.S. crude would start to have an impact as would more structural demand suppression from higher prices and lower GDP growth,” the report noted.

In the long term, however, energy security will be elevated as a political priority, which will, in turn, boost domestic production of oil and gas in North America, while even greater emphasis is placed on the energy transition and renewable technology and investment.

Although prices will continue rising, the market will eventually see demand destruction, according to KPMG’s Global Head of Energy Regina Mayor.

“In terms of oil prices, we’ll continue to see prices go up,” she said. “However, there is a point where we’ll see demand destruction, and I think we’ll start to see that soon in the U.S. gasoline market. Consumers will start to make a choice, not to a take trip because of gas prices.”

U.S. refiners

Biden’s ban on Russian oil and refined products and other energy imports will primarily affect U.S. refiners, according to Pete Speer, senior vice president at Moody’s.

“Russian crude is a small proportion of overall feedstocks used by U.S. refiners, so alternative sources can be found,” he said.

“This substitution will likely drive oil and refined products prices even higher and cause some U.S. refiners to run on suboptimal crude slates and output levels as they manage through the logistics of sourcing different crudes and adjusting their processing configurations,” he said.

“This will likely hurt profitability of individual refineries where Russian oil was a meaningful proportion of oil processed,” Speer continued, “but is unlikely to be a material negative effect on independent refining or integrated oil companies given their size and diversification.”

In favor

Despite soaring prices at the pump, political leaders have expressed support in favor of Biden’s decision to ban Russian energy.

“The ban announced by President Biden is the right move—the American people did not want in any way to support Putin’s war by buying Russian energy,” former Democratic U.S. Senator Mary Landrieu and Heidi Heitkamp, co-chairs of the Leadership Council of Natural Allies for a Clean Energy Future, said in a joint statement.

“This moment in history underscores the need for America’s leaders to embrace practicality. For too long, our national conversation on energy has been one of the extremes that has ignored the fundamental pillars of energy security, affordability and reliability,” they said.

Their statement also stressed on the importance of U.S. natural gas to address climate goals faster, without sacrificing affordability or reliability.

“We need to come together around the facts not ideology to get this done,” they said.