New sanctions on Russia's energy sector could temporarily raise gas prices and shift oil export patterns, according to experts who analyzed the global impact of penalties previously placed against the country's fossil fuels.
President Joe Biden is reportedly considering imposing new sanctions on Russian energy before he leaves office, the Washington Post reported, citing four people familiar with the matter. Sources suggested that such a move could give President-elect Donald Trump more leverage in potential negotiations with Russian President Vladimir Putin.
If Biden proceeds with the sanction, analysis of U.S. sanctions against Russia at the beginning of the conflict with Ukraine indicate energy sanctions can result in higher gas prices globally.
The price of natural gas began to rise amid tensions in Russia in 2022 but reached a record high in the U.S. after the country invaded and sparked a yearslong war with its neighboring country, Ukraine.
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"Western sanctions on the Russian energy sector have reduced Russian revenues, but have also created costs for the sanctioning nations," the Federal Reserve Bank of St. Louis wrote in a review of the impact of energy sanctions on Russia.
Biden and Western countries imposed sanctions on Russian energy after the country invaded Ukraine, resulting in rising diesel prices worldwide because there "simply weren't enough refineries to meet diesel demand, especially after the U.S. and other countries stopped purchasing energy exports from Russia," according to an analysis from the Federal Reserve Economic Data (FRED).
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According to FRED, the Producer Price Index (PPI) for diesel in June 2022 was approximately 109% higher than in June 2021. However, data from the Bureau of Labor Statistics indicates that prices have decreased considerably since.
The American Enterprise Institute (AEI), a public policy think tank, says that sanctions can have varying effects, such as a "significant shift in oil export patterns, rerouting trade flows in an economically inefficient manner and forcing sanctioned countries such as Iran, Russia, and Venezuela to sell crude at below-market prices."
While the move could increase oil costs, one advocate of the idea suggested that the election being over could be a reason for Biden to move forward with the penalty.
"The Biden administration has been worried about increasing gas prices and worsening inflation. That was the main constraint on their Russia sanctions policy, the domestic ramifications," said Edward Fishman, senior research scholar at Columbia University's Center on Global Energy Policy, the Washington Post reported. "But the election is over, and inflation is under control. The reasons to be this cautious on sanctions don't apply anymore."
The report comes just days after the U.S. issued fresh sanctions against several Russian-linked entities and individuals involved in the building of Nord Stream 2, the massive undersea gas pipeline linking Russia to Germany.
Fox News' Breanne Deppisch contributed to this report.
