Biden’s ban on the US purchase of Russian oil raises fears of escalating inflation around the world. Experts assess the scenario
On March 8, US President Joe Biden announced a ban on the US purchase of Russian oil, as yet another step intended to impact Russia's economy following its invasion of Ukraine.
In his speech, Biden admitted that the measure may raise the prices of oil barrels around the world: "We understand that Putin's war is driving prices up, but that is no excuse for companies to raise them too much," he said.
Oil has already risen to US$ 130 a barrel, and the forecast is that it will continue to rise – by how much, no one dares say.
A day before the measure was announced by Biden – and when warning about the effects of an eventual US ban on Russian oil –, Russian Deputy Prime Minister Alexander Novak was the only one to hazard a guess. Declaring that the sanction would have “catastrophic consequences for the global market”, Novak predicted that oil barrel prices would rise to as much as $300.
If the price of a barrel effectively more than doubles – and the costs are fully passed on to consumers around the world –, the prospect is for a frightening escalation of inflation. In Brazil, gasoline could, for example, exceed R$ 15 a liter.
Everything will then depend on how the world tries to circumvent the boycott of Russian oil production – the world’s second largest oil exporter, after Saudi Arabia only.
The US, anticipating the scale of the problem, is already on the move – knocking on the door of an old rival, Chavista Nicolás Maduro, President of Venezuela, to try to isolate Russia and ensure a new source of oil supply.
Specialists consulted by Metrópoles assess the possible impacts – to Brazilian citizens – of the post-Russian oil ban scenario in the US.
To André Perfeito, chief economist at Necton, forecasts are not encouraging: “Fuel prices, which were already rising, should increase once again,” he explains, recalling the recent and recurring price increases across Brazil.
According to Mr. Perfeito, the impact of the ban will fall on Petrobras and its ability to manage the national crisis. Despite its large oil reserves in Brazil, around 30% of the domestic market depends on imports of refined products by private companies and the state company itself. Petrobras has been constantly adjusting fuel prices based on international oil rates.
In an attempt to lessen the impact on inflation and on citizens' wallets, the Brazilian government is considering a subsidy to cushion the rapid rise in oil prices. The program is expected to last three to six months, and may cost billions to public coffers.
To Luciana Reis – a specialist in the oil, gas, infrastructure and energy sector and a partner at Barcellos Tucunduva Advogados –, the alternative proposed by the government will be unable to hold back oil prices over a long period of time.
For Luciana Reis, a specialist in the oil, gas, infrastructure and energy sector and partner at Barcellos Tucunduva Advogados, the alternative proposed by the federal government is unlikely to hold down the price of oil for long.
“Since we aren’t self-sufficient in the field of oil products, we’ll have to continue importing despite high prices. When selling, however, rates will have to be lower than when purchasing, so as not to impact Brazil's production chain,” she explains.
Ms. Reis also criticizes the government’s proposal concerning Petrobras. She argues that Petrobras’ good financial health proves it doesn’t need this type of support: last year, the state-owned company’s net profits were a record R$ 106.6 billion.
“Public money will be sent to a company that does not need it,” she argues.
