What Impact is the Russian Invasion of Ukraine having on the US Energy Market?
The immediate response was a surge in energy prices which would directly affect the cost of utilities for many businesses and industries dependent upon oil and natural gas.
Things have calmed down a bit because Western powers’ wave of economic sanctions announced on February 24, 2022, didn’t include energy industry sanctions.

Oil and natural gas prices have already risen due to severe winter storms. What happens if the next wave of sanctions may include a hit on the Russian energy industry?

Perhaps surprisingly, Russia is one of the biggest suppliers of energy in the world. Data reported in the CIA World Factbook notes that Russia is the second-largest exporter of crude oil in the world, after Saudi Arabia. It is the world’s number 1 exporter of natural gas, far ahead of second-place Qatar.

The United States has become a large importer of Russian energy. Since the change in US administrations in 2021, the US imports tens of millions of barrels of crude oil from Russia every month. The reluctance to sanction the Russian energy industry directly results from US consumption of Russian crude oil and Europe’s tremendous dependence on Russia’s natural gas.

This reluctance may end up being a moot point. Russia now has $630 billion in foreign exchange reserves, a sum of money that means it could survive turning off the taps. China can also come to Russia’s rescue by buying oil.

Experts say that a Russian slow down to retaliate for sanctions would decrease the world oil and gas supplies. The global scramble for replacements that would drive prices higher.

A US State Department official anonymously told Reuters on February 22, “We would like the market to take note that there’s no need for increasing the price at the moment.”

Despite that statement, the surge in oil and natural gas prices on February 24 reflected a rise in global fears over oil and gas availability. Should either the West sanction the Russian oil and gas industry or Russia itself turn off the taps, or even the anticipation of such moves, we can expect continued volatility in prices.

The price increases will impact consumers who use oil and natural gas for heat and utilities and companies that use natural gas in production processes. Utilities will pay more, and so will some consumers (including businesses) who have real-time pricing schemes. Natural gas provides 35% of power generation in the US.
Now’s a good time to review your current energy contract, or consider initiating one.

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