The Brent Crude oil index reached $100 per barrel for the first time since 2014 on Wednesday night as Russian forces launched an attack on Ukraine, increasing the likelihood of international sanctions that could further disrupt energy markets.
Stock futures fell, with the S&P 500 index down about 1.8 percent by midnight Eastern time.
Steadily rising oil prices are already affecting gasoline prices in the United States. Americans are paying nearly a dollar more for a gallon of gas — to roughly $5 in some markets — than they did last year.
The U.S. average for regular unleaded gasoline hit $3.53 a gallon on Wednesday, according to AAA. That’s 21 cents higher than last month and a hefty jump from the $2.65 recorded a year ago.
Analysts have said sanctions against Russia ― responsible for roughly 10 percent of the world’s oil supply ― could disrupt Europe’s energy supply and send price shocks across the globe. In an address Tuesday, President Biden warned that sanctions intended to punish Russia would probably affect U.S. consumers.
“Defending freedom will have costs for us as well here at home. We need to be honest about that,” Biden said. “But as we do this, I’m going to take robust action to make sure the pain of our sanctions is targeted at the Russian economy and not ours.”
A White House news release issued Wednesday night indicated that Biden would meet with Group of 7 nations Thursday morning and then speak to the American people to “announce the further consequences the United States and our allies and partners will impose on Russia for this needless act of aggression against Ukraine.”
The most expensive gasoline is found in California, according to AAA, where the state average is $4.74 a gallon. Although the number is slightly higher in the state’s largest metro areas — $4.75 a gallon in Los Angeles and $4.90 in San Francisco — the cost in Northern California’s Humboldt County was within a penny of $5, according to GasBuddy.
Rounding out the 10 most expensive locations, according to AAA: Hawaii ($4.51), Oregon ($3.98), Washington state ($3.98), Nevada ($3.95), Alaska ($3.85), New York ($3.75), Pennsylvania ($3.73), Washington, D.C. ($3.72) and Arizona ($3.71).
Markets have typically shrugged off geopolitical tensions, but the ongoing standoff on Ukraine’s border has roiled markets in the past month. Russia’s global oil exports are on par with the United States and Saudi Arabia.
On Monday, Putin signed decrees ordering military forces into two separatist regions of Ukraine for “peacekeeping” purposes as Moscow recognized the regions’ independence. The move came after a buildup of troops and weaponry near Russia’s border with Ukraine. Biden has referred to the recent troop movements as “the beginning of a Russian invasion” in Ukraine.
On Wednesday evening Putin said Russia would launch a “special military operation” in Ukraine. Televised dispatches from CNN reporters in multiple Ukrainian cities recorded what appeared to be distant explosions.
A full-scale invasion is expected to damage important pipelines connecting Russia to Europe, even if they are not specifically targeted, Raymond James analyst Pavel Molchanov told The Washington Post on Tuesday. It could also bring broad-based and harsh sanctions that affect Russia’s energy industry far beyond the initial phases of conflict, Molchanov said.
“It’s expected that sanctions on Russia would lead to a retaliation by its government, whereby gas supplies are cut to Europe — Russia is Germany’s major energy supplier — leading to another supply shock that would ripple through global energy markets,” said Kyle Roda, a market analyst with the foreign exchange trading company IG.
Western powers have already begun placing sanctions on Russia, including shutting down a planned $11 billion Nord Stream 2 gas pipeline between Russia and Germany. The Biden administration has imposed a “first round” of sanctions targeting Russian banks and wealthy individuals. Those initial measures include sanctions on the company responsible for Nord Stream 2, a subsidiary of the Kremlin-controlled Gazprom.
Policymakers could exert other levers to counterbalance any oil shortages, but analysts warn that no single country could replace the volume of oil Russia ships to Europe. The White House and congressional Democrats have considered pausing a federal gas tax of roughly 18 cents per gallon, for example.