On Tuesday, U.S. President Joe Biden signed an executive order to immediately cut off imports of Russian energy, banning the purchase of crude, gas, and coal, as Russia President Vladimir Putin continues his war against Ukraine.
It’s a dramatic gesture, but the fallout from the executive order will be limited by the small value of U.S.-Russia energy trade. Biden’s order will cut out 10% of the U.S.’s current energy mix, including roughly 3% of U.S. oil supply, which analysts expect the U.S. can easily replace with purchases made elsewhere—although that might require easing sanctions on other exporters, like Venezuela and Iran.
And from Russia’s perspective, the loss of the American market is hardly catastrophic. Russia is the world’s largest oil exporter, shipping 7 million barrels of petroleum and crude per day. The U.S. purchases just 3% of that.
“Biden’s decision to ban U.S. imports of Russian oil is noteworthy, but movement toward a European ban on imports of Russian oil and gas would be the real showstopper, given Europe’s relatively high dependence on energy supplies from Russia,” Jason McMann, head of geopolitical risk analysis at Morning Consult, told Bloomberg.
Europe is a much bigger customer, absorbing close to 60% of Russian oil exports. But the EU—which relies on Russia for roughly 40% of its collective gas imports and 25% of its oil needs—is considering a plan to slash its dependence on Russian oil and gas by two-thirds this year, too.
Losing both the EU and the U.S. will cleave a sizable chunk out of Russian energy sales that exporters will have a hard time replacing, even though Russia still has some substantial customers left.
According to the Washington Post, a cohort of economies—mostly in Central and Eastern Europe—accounting for 32% of Russian oil exports, have yet to back sanctions on Russia. China—Russia’s single largest customer for oil, soaking up 1.6 million barrels of Russian crude per day—leads the pack.
China could easily increase its orders of Russian oil and might well benefit from doing so. With fewer customers, Russian crude is trading at a discount to international rates. Once the EU starts substituting its Russian suppliers with imports from other countries, the international cost of oil will spike, too.
India—another sanction holdout—might take on more Russian crude as well. The subcontinent imports 85% of its oil needs but only receives 3% of that mix from Russia. Faced with the prospect of Brent crude hitting $200 a barrel, New Delhi could restructure its oil imports to favor Russia.
The U.S. Energy Information Administration has forecast that heating oil expenditures will be 43% higher this winter compared with last year, as oil prices surge and weather grows generally more extreme. Soaring energy costs might prompt homeowners (and governments) to embrace one of the most effective and most overlooked means of cutting energy bills: insulating homes. Bloomberg
The UN Environment Assembly is drafting a treaty on plastic pollution to be signed by almost 200 countries, binding their governments to tackle pollution at every stage of the plastic life cycle. The UN describes the bill, which passed despite chemical manufacturer lobbying against it, as “truly historic.” The treaty, due to be implemented in 2024, will include mandates on cleaning up ocean-borne plastic pollution, as well as curtailing plastic production. FT
From forest to field
The Amazon rain forest is losing its ability to recover from droughts and changes in land use, scientists said Monday, warning that swaths of the forest are at risk of converting permanently to grassland, destroying the natural ecosystem. The “tipping point” could release up to 90 billion tons of carbon dioxide, currently trapped in trees, into the atmosphere. New York Times
A Malaysian tech firm, DiBiz, launched the world’s first online marketplace for sustainable palm oil on Tuesday called Trustparent Marketplace. Palm oil plantations have decimated natural ecosystems in Malaysia, as acres of rain forest are cleared to make way for monocultures of palm trees. The Roundtable on Sustainable Palm Oil, a business group, has certified just 20% of global palm oil production as “sustainable.” Reuters
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