Executives at a U.S. energy conference raised alarms about long-term energy security as the United States moved ahead with an outright ban on Russian oil and gas imports, which sent prices surging past $130 a barrel.
The CERAWeek energy conference on Houston is taking place with crude prices nearing records as nations and numerous companies ban imports from Russia – a top global exporter of oil and gas critical to the energy industry’s daily flows.
“We need to think about this in the context of more than just a few months – heaven forbid this lasts more than a year,” said Ryan Lance, CEO of ConocoPhillips. “We knew this was a thinly balanced market and it didn’t take much to tip it one way or another.”
On Tuesday morning, President Joe Biden announced a U.S. ban on Russian oil and other energy imports. Biden warned that U.S. energy prices would rise but added that the step “will deal another powerful blow to (Russian President Vladimir) Putin’s war machine.”
Oil prices jumped on the news, with Benchmark Brent crude LCOc1 for May climbing by 5.4% to $129.91 a barrel by 1345 GMT.
Even before the announcement, prices had surged as major buyers already effectively self-sanctioned Russia from global markets. Executives at oil majors and others warned there are few ways to replace that nation’s exports of 7 million barrels per day of crude and products.
“I’ve been asking for a total ban by the U.S.,” said Scott Sheffield, chief executive at Pioneer Natural Resources. “I think it’s best to bankrupt the oil and gas industry in Russia.”
Washington and other consumers have been pressing for faster output increases by OPEC+, but the group has limited spare capacity to produce more and some OPEC+ members are already struggling to hit existing production quotas.
Saudi Aramco Chief Executive Amin Nasser said Tuesday the mixed signals from policymakers are making the crisis worse.
“For example, as oil and gas investments are discouraged, demands are being placed on our industry to increase production,” he said.
Saudi Arabia, the world’s biggest crude exporter, is the de facto leader of the Organization of the Petroleum Exporting Countries which has an alliance with Russia and others. The group known as OPEC+ has been gradually unwinding output cuts put in place when prices plummeted during the pandemic.
OPEC Secretary General Mohammad Barkindo said geopolitics was dominating oil price moves. While a tight market could be shrinking demand, he said, “the other side of the equation is probably more critical at the moment, which is supply is increasingly lagging behind.”
On Monday, OPEC officials met U.S. shale oil company executives on the conference sidelines, where Barkindo stressed that “there’s this general realization that something needs to be done” by the shale companies as well to boost investment.
Vicki Hollub, CEO of Occidental Petroleum, said markets cannot bank on increased shale production quickly because of supply-chain challenges.