The United States is not “dependent” on Russia for oil

I realize it is probably obvious from my posts lately, but I have absolutely lost my patience with MAGA narratives. As a lifelong ideological conservative, my biggest problem with Trump was that he wasn’t a conservative. I was, however, willing to give him the benefit of the doubt because I agreed with his views on tax policy and some economic issues. After watching him (and MAGA “influencers”) side with Putin in the Ukraine conflict and try to hype false narratives for why the United States cannot take on Putin even on an economic (non-military) basis, I am so over with this crowd I need another word for over.

The latest fake drivel coming out of MAGA circles is that the Biden administration has somehow sabotaged US energy independence by importing more oil from dictatorships like Russia instead of increasing drilling at home because the climate change new world order or something. It’s unclear how increasing oil imports supports the fight against climate change in their logic, but they are absolutely sure it does somehow.

You don’t actually have to rely on anyone’s opinion of how much oil the US is getting from Russia and how that compares to domestic production or imports from other, more politically sane, countries. Like every economic indicator under the sun, this is published on a regular basis.

From the US Energy Information Administration:

Imported oil from Russia started increasing not under Biden, but under Trump. That factoid should not shock you at all, considering Trump’s political life was managed by pro-Kremlin lobbyists who focused on the corrupt energy industry, among other things. (“But Hunter Biden did it too! The only reason Ukraine is even in this war is because of his hookers and blow!”) It has merely continued to increase under Biden, but will decrease (regardless of what politicians choose to do) as US companies back away from Russian oil and western megabanks refuse to provide financing for Russian projects or credit for commodity trading. You may feel like this is a moral issue, but the salient point for these folks is they are unlikely to get repaid after extending funds.

(This chart probably confuses a lot of people, thanks to Trump’s blustering about energy independence. Why were we still taking in petroleum from Russia during his presidency? My sense is his notion of “energy independence” had more to do with what we were exporting rather than what was coming in, but who knows.)

You will also note that the magnitude is nothing like what is being hyped in right-wing circles now. They are fighting over what constitutes, at most, a few weeks’ supply versus US energy consumption, and certainly not the largest country we are importing from. We could change this dynamic simply by consuming less energy and not changing anything else. (That’s what the Greatest Generation would have done.)

Now, on to the issue of domestic energy production. (Full disclosure: I personally own shares of wildcatter company Diamondback Energy, stock symbol FANG, which I happily bought when oil futures inverted during the height of the Covid panic in 2020. I bought them at a little over $18 a share, and they are now trading at $136 a share. So I absolutely have profited and will continue to profit immensely from domestic oil production.)

We are not experiencing inflation right now because the Biden administration decided to shut down the Keystone pipeline. The Keystone pipeline was not operational and therefore was not contributing to domestic oil supply. We did not “replace” oil coming from the Keystone pipeline with “Russian oil.” The Keystone pipeline was commissioned in 2010 and has been a hot potato between Republican and Democratic administrations ever since. The Democrats cancel the project. The Republicans bring it back. Rinse, repeat. Most of the oil the US consumes does not come from foreign sources regardless of the status of this charade. Also, it’s not like America can just start drilling for oil and oil magically appears. There is a long process for bringing energy projects online, not the least of which is identifying where deposits are even located. This is not some immediate fix for inflationary pressures.

That said, oil companies are capitalists. If oil is trading through the roof globally because of the Ukraine war, they are going to sell their oil to the highest bidder. This notion that people have that there’s going to be some kind of America First discount on oil is bonkers. This is not even a hypothetical in the current era. When Russia shut down natural gas flows to Europe last October, before most Americans were even talking about their shenanigans, do you know where US natural gas started going? In one giant armada to Europe, because they were the highest bidder. This is how a market economy works. Their higher cost of living becomes our higher cost of living. Unless you want to support an export ban during a time of war, in which case you will find you suddenly have no allies.

In the debate about cutting off Russian energy, the clear loser is the European Union. In sharp contrast to the energy situation in the United States, the EU gets 40% of its natural gas from Russia and 25% of its crude oil. And it’s not even equal within the EU, hence the squabbles internally over there in the build-up to war. Italy, Germany, and central European countries rely the most on Russia for energy.

But reliance on Russia for energy, from a policy perspective, was always intended to be a “bridge” to clean energy for Europe. For them, this is not a decision between renewables and fossil fuels long-term, but a question of who will be their new bridge and at what price to their public.

Another thing few people seem to consider is that Russia has had many years since Crimea to consider how it will respond to sanctions. It has already found the buyer of last resort for its commodities: China. Mongolia (the country sandwiched between Russia and China) has already agreed to build a pipeline that would transfer 50 billion cubic meters of natural gas to China every year. Mongolia will be the new Ukraine. This seems to be why Russia was willing to take on the economic risk of invading Ukraine in the first place.

Unlike Europe, China really does not give a hoot about the environment. They are already the world’s largest user of fossil fuels and the world’s largest emitter of greenhouse gases. This makes China a more interesting counterparty than Europe anyway – their economic interest is durable beyond the next decade.

It is also abundantly clear that China knew about Russia’s plans to invade Ukraine far in advance. US intelligence agencies have said that China asked Russia not to undertake the invasion during the Olympics, a request Russia indulged. Back in the fall, I was suspended from Facebook for three days for “hate speech” for posting a Bloomberg article about how China had directed its utilities to hoard commodities “at any cost.” I was watching the energy crisis in Europe at the time and made a comment about how the United States was too stupid to know that it was already in World War III. I made a comment about how the trade aspect of the conflict was already happening and we should be preparing a response – apparently that is “hate speech” now. But anyone who is filling up their car with gas these days can tell I was right.

China is very proud of what they call their “Everlasting Friendship” with Russia. They abstained from two United Nations votes condemning the war in Ukraine and demanding that Russia withdraw its troops. If you look at China’s state-sponsored accounts on Twitter right now, they have joined Russia in the propaganda effort, suggesting that the Ukrainian “Nazis” have fired on and killed Chinese students. Obviously this never happened and they know it never happened.

It is interesting, to put it mildly, to see the Biden administration having spontaneous, unannounced meetings with Maduro, whom the US does not even acknowledge as the rightful leader of Venezuela. As someone who lives alongside Venezuelan refugees in South Florida, I find this disgusting. Same with talk of dropping sanctions on Iran. Perhaps the most important element to the present situation is both of these countries are friends with Russia and China. So we would be continuing to enrich an evil alliance in the name of not enriching an evil alliance.

But I am willing to believe the Biden administration is more stupid than evil themselves on this topic, for a number of reasons.

First, the Biden administration does not have a single official with actual working knowledge of how the energy industry works. Biden (or whomever is calling the shots in the Biden administration, because we know it’s not the memory ward patient) only chose climate change activists for positions in energy, trade, and transportation. They made it a point of shunning anyone with experience in fossil fuels to appease their base.

This means they likely have no idea that Venezuela could not produce much oil to begin with, as their country is in shambles right now. They seem to be just throwing whatever energy noodle they can find against the wall and seeing if it sticks.

Second, Biden does not seem to be concerned with the availability of fossil fuels at all. What they care about is inflation and the impact that has on their poll numbers ahead of midterms. If you think Americans are bitching about inflation right now, wait until we get our first reading in the double digits, which with the current trajectory in energy prices is probably coming very soon.

This is why Biden keeps releasing oil from the country’s Strategic Petroleum Reserves. It’s not because we are “short” on oil, but because he thinks more supply will lower prices. The SPR was intended to be used in the event of an actual emergency, like our being directly involved in a war, not to manipulate prices. But that is what Biden is doing here, and even worse, it’s not having a material impact on prices anyway. We are basically blowing up the SPR for nothing at all. I cannot imagine the climate activists he has working for him care if the SPR ends up completely depleted anyway. That’s not how they think. If anything, these lunatics think that will probably light a fire under our butts to invest in windmills or something. Much like how they thought about gas prices, until gas prices became totally out-of-control. Cause and effect, very difficult concepts for some folks.

We are in a very strange position as a country where we have two political parties that are both cut off from reality and we are in a bit of an economic trap between inflationary concerns and a recession that is probably already underway. Even if Republicans win in November, they are unlikely to be able to change any of it with a Democrat in the White House, assuming they have some productive policy ideas beyond “drill, baby, drill,” and I doubt they do. That means our government will be paralyzed. I’ve been looking for silver linings for a while and I just don’t see what they might be.

Another issue is that so far this conversation is all about energy commodities. Ukraine is the breadbasket of the world, feeding close to a billion people from its fields. What happens when that is cut off? Things like Arab Spring started with food shortages. It’s an easy path to social unrest and terrorism. Right now, it is winter, but what does the next planting season look like?

Ukraine is also the source of elements that are critical to electronics, which are now built into everything consumers buy. We’ve already seen the impact the chip shortage had on things like car prices.

I have started to regard all of this as the opportunity cost of not taking on Putin. I know everyone says blah blah blah, you’ll start WWIII. I’m not sure how anyone thinks a semantics game like “we can impose sanctions that have turned Russia into the North Korea of Europe in the span of a week, and we can arm their enemies with top-of-the-line weapons, but actual combat is when a war starts” makes sense. I also don’t understand how anyone is watching Russia fail so badly in Ukraine, to the point where it is trying to get folks in Syria to enlist now, and thinks they have somehow maintained their nuclear infrastructure in pristine condition. Beyond that, Russia has already threatened to nuke us so many times that it seems like any potential attack is hardly related to our “good behavior.” Instead, we are just in a holding pattern of sitting back and watching the world economy burn down for nothing, much like we were with Covid.

The only thing that is going to stop these near-term hyperinflationary pressures is regime change in Russia. It is also important that we not continue to appear weak to China, and right now, the message that China is getting is they can hurt us more than we can summon the willingness to hurt them. There’s nothing “patriotic” or resilient about that hot take, especially when we are not, as a practical matter, doing anything to make our supply chains more local. Right now, that’s the only rhetorical position both Republicans and Democrats share, and they are doing nothing about it. Why? Because they are both so fucking petty they don’t want to give the other credit for something ahead of midterms. They’d both burn the world down for one more incremental “victory.” Really sickening to watch.

5 thoughts on “The United States is not “dependent” on Russia for oil

  1. Poignant (but factual) as always. But, methinks you’re a tad naive if you think Biden’s overall moves (not just Keystone) has not impacted world prices (at least on the margin); e.g., the recent withdrawing of support for the EastMed pipeline.
    One last thing that would shed more light, is the whole light vs. heavy, sweet vs. sour aspects oil and our current refineries composition.
    Carry on 👍😎🤟

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    1. They play these games ALL THE TIME, and it’s not just climate ideology that factors into the calculus. Energy is a bargaining chip for just about anything. The same people who had no problem canceling domestic pipeline projects were 100% willing to give Putin NordStream2 if he’d be a good boy. If anything, that is the single largest factor that drove up prices recently – because that actually does impact immediate operations. It’s a real problem how much demand for energy is increasing, wherever and however you want to get it, and a lot of it is about having a rich, decadent society. We had higher demand for fossil fuels before the Ukraine war than at any point in history, even with the climate emergency banter. And a lot of it is nonsense stuff, like wanting to have grocery stores on both sides of the street in every suburb full of food that isn’t even close to being in season, which requires heated greenhouses to produce or to fly on a jet from the other side of the world, or wanting 2-day shipping instead of walking one’s fat ass into a store to get envelopes instead of watching reruns, or wanting every little thing swaddled in plastic because germs. I mean, I live in Florida, there’s an ocean literally *right there* and it’s big business to fly in fish from all over the world. The New Yorkers and Bostonians want lobster so badly there are daily flights for the insects of the sea down here. That’s why I was saying that previous generations would have absolutely modified their behavior in response to a “crisis” like this (yay, victory gardens) rather than invent narratives about how the world is ending because the guy who supplies a few weeks of fuel a year has gone insane and started a genocide. Sometimes I think about what it would be like to explain current events to my grandparents (may they rest in peace) and I just can’t imagine their reaction.

      Liked by 1 person

      1. you had me at “insects of the sea” 🙂
        And I agree, tons of pent up demand to get out & about, let a lone the cross-street groceries. NB – this really hit home as I noticed the other day, they’re building a new Starbucks (w/ drive-thru), one signal down form an existing (w/ drive-thru), one signal the other way is another existing (w/ no drive-thru), and continuing another 2 signals, yet another existing (w/ drive-thru). I’ll take conspicuous consumption for $1200 !!

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      2. The big grocery chain in Florida (Publix) is pioneering a new thing in a big Miami suburb where they have a Publix on one side of the street and a Publix on the other side of the street. This is already in competition with Walmart, Whole Foods, The Fresh Market, Winn-Dixie, Target. All duplicating the same products and services. There aren’t more people who need food, it’s all about the “experience” of getting it faster in a brand-new environment. It’s also not going to improve their profit margins, they just feel like they have to keep it up.

        Liked by 1 person

  2. That seems borderline crazy. Your last sentence, however, reminds of what I’ve observed, here in NorCal, over the years… and that is the crazy Napa wineries that drop $25M-30M -or more- on upgrades, not so much for the production end of things, but rather for fancy “tasting rooms”, etc. Yeah, I do know they make some bank via on-site purchases (a good buddy still works for Silver Oak in their “tasting room” so I know their rough #’s), but I could never figure out a rational ROI (although I am sure taxes play some part).

    Liked by 1 person

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