“I still don’t think that we understand what the full implications are for energy markets writ large, and that’s because there is this really glaring uncertainty as to whether [Monday’s] actions in regard to [Ukraine] represent the end state of what Mr. Putin intends to do or simply a starter course,” said Jonathan Elkind, senior research scholar at Columbia University’s Center for Global Energy Policy and a former energy official in the Clinton and Obama administrations.
“I want to limit the pain the American people are feeling at the gas pump,” Biden said from the White House. “This is critical to me.”
The most immediate energy market fallout came in Europe, as Germany announced Tuesday it is suspending authorization of Nord Stream 2, a still-inactive natural gas pipeline from Russia that was designed to significantly increase Russian exports.
German Chancellor Olaf Scholz called Russia’s recognition of two breakaway regions in eastern Ukraine a “serious break of international law” and said Germany wanted to signal that “such actions won’t remain without consequences.”
Because that pipeline isn’t already delivering gas, the suspension of its commissioning won’t lower supplies to Europe immediately. Germany’s move will probably anger Moscow, though what, if anything, Russia will do about that is uncertain.
In a tweet Tuesday, Dmitry Medvedev, deputy chairman of Russia’s security council, warned that Germany’s decision means it will “very soon” be paying more than double for natural gas. He did not elaborate.
Russia is the world’s second-biggest natural gas producer, behind the United States, and the third-largest oil producer, behind the United States and Saudi Arabia, according to Energy Department data.
Bob McNally, a longtime energy consultant and former adviser in the George W. Bush White House, said crude oil prices could rise above $100 a barrel in the short term on fears of a protracted conflict but would probably reverse unless there is a severe supply disruption.
“We’re probably headed over $100 a barrel just because now I think folks are seeing no one is taking a diplomatic off-ramp,” McNally said. But he added: “My view remains that the risk of an actual oil supply interruption is fairly low.”
One risk for the West could come if Russia decides to retaliate against Western sanctions by carrying out cyberattacks against U.S. or European pipelines, McNally said. The United States accused Russian hackers of mounting last year’s attack on Colonial Pipeline, which led to panic buying of gasoline on the East Coast.
Russia’s domestic security agency last month arrested 14 alleged members of the REvil ransomware gang, including a hacker that U.S. officials said helped execute the Colonial Pipeline attack.