Putin at the pump

MARY REICHARD, HOST: Coming up next on The World and Everything in It: the rising energy costs of Russia’s invasion of Ukraine.

NICK EICHER, HOST: Washington’s response to that invasion includes heavy sanctions on Russian banks and its central bank. But the United States has stopped short of banning Russian oil and gas.

Led by House Speaker Nancy Pelosi, more and more members of Congress have been calling for such a ban, despite White House resistance to this point. Press Secretary Jen Psaki last week explained why:

PSAKI: We don’t have a strategic interest in reducing the global supply of energy. That would raise prices at the gas pump for the American people because it would reduce the supply available.

Energy prices are soaring anyway. The national average for a gallon of regular unleaded gasoline here in this country just topped $4 for the first time in more than a decade.

Here to help us understand is Chris Miller.

He is an assistant professor of international history at the Fletcher School at Tufts University and co-director of the school’s Russia and Eurasia Program.

REICHARD: Professor, good morning!

CHRIS MILLER, GUEST: Thanks for having me, Mary.

REICHARD: Glad to have you. Well, the Biden administration went out of its way to leave energy out of the sanctions it imposed on Russia in hopes of avoiding a big spike in energy costs for Americans. But again, those prices are rising anyway. Why is that?

MILLER: Well, what we've seen in energy markets over the past couple of weeks is that although none of the sanctions that either the U.S. or Europe have imposed have directly hit energy markets, energy markets are worried anyway that future sanctions might come or that Russia on its own might disrupt its exports of oil and gas. And the fact that the war is happening is already driving up energy prices, even if the Biden administration or Congress don't take any specific steps to change what's legal and illegal when it comes to energy imports.

REICHARD: Let’s provide some context. How important has Russia been to the global energy market?

MILLER: Well, Russia is one of the three biggest producers of oil alongside the United States and Saudi Arabia. It's also an important producer of natural gas, much of which it supplies to Europe. And Europe would struggle to make it through this winter without importing Russian natural gas. It would have to shut down some industries if Russian gas exports were to stop. If Russia would have stopped exporting oil, the world would survive, it would just be a much more expensive place to drive a car.

REICHARD: And how dependent the United States and Europe has been on Russian energy?

MILLER: Well, when it comes to oil, oil is traded globally. So it's not that much more difficult to buy from any other country if you can't buy directly from Russia. It's a little bit more expensive, but not a huge change. But for gas in particular, Europe is quite dependent because unlike oil, which is usually shipped around the world on ships, gas is largely shipped via pipelines. And there's a number of pipelines that connect Russia to Europe, and those aren't easy to change in the short term.

REICHARD: Chris, I noticed a really interesting development and that is that a delegation of top U.S. officials just traveled to Venezuela for meetings with the Nicolas Maduro regime. And that’s remarkable because the U.S. government believes Maduro rigged recent elections there and the U.S. has repeatedly called for him to step aside.

But this is a situation of the lesser-of-two-evils. Venezuela is a significant oil producer. And the Biden administration is apparently looking to Venezuela to maybe help replace Russian oil and perhaps deprive Vladimir Putin of an ally. Chris, what do you make of this meeting with the Maduro regime?

MILLER: I think you're right to say that it is about trying to find other sources of oil if Russian oil does get further knocked offline and we've seen this not only with regard to Venezuela, but also Saudi Arabia, where there are reports that the Biden administration is asking the Saudis to increase oil production. And also with Iran, where I think there's no doubt that part of the Biden administration's rush to complete a new deal with Iran is partially motivated by the desire to see Iranian oil back online to bring prices down in case Russian oil is knocked offline.

REICHARD: What else can the United States and Europe do to help break free of Russian energy as painlessly as possible?

MILLER: Well, in the short term it's difficult simply because changing your energy sources takes a fair amount of time. So, we shouldn't think that there's any sort of silver bullet that's going to keep energy prices down in the short term. If this war lasts longer, energy prices are going to go up. In the longer term, though, I think we never should have gotten ourselves reliant on Russian energy in the first place and ought to do more to make sure we're supplying our energy needs—whether oil or gas—from friendly countries rather than from adversaries.

REICHARD: What else do you think Americans need to know in this situation?

MILLER: Well, I think a lot of the debate in Washington is about whether or not we should sanction Russia and what effect that will have on energy prices. But the reality is that prices are already going up because of the war. It's Putin's decision to invade that has driven prices up, because no one knows what's going to come next. Traffic to the Black Sea, which much of Russia's oil transits through, is now obstructed because of the Russian naval deployments there. And so whatever the U.S. decides to do when it comes to sanctions, the reality is that it's the war that's driven up energy prices, not U.S. political decisions.

REICHARD: Alright, Chris Miller is a visiting fellow at the American Enterprise Institute. Chris, thank you so much.

MILLER: Thanks for having me.

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