President Joe Biden ordered “profound” new sanctions targeting Russia Thursday after its invasion of Ukraine, saying Russian leader Vladimir Putin “chose this war” and his country will bear the consequences.
The sanctions target Russian banks, oligarchs and high-tech sectors, but they stop short of imposing restrictions on energy supplies from Russia, the world’s third largest oil producer. The Biden administration is not expected to target Russia’s oil and gas flows due to concerns about inflation and the harm it could do to its European allies and U.S. consumers, who are already grappling with the highest inflation in 40 years.
In his address to the nation Thursday, President Biden said the U.S. will “closely monitor energy supplies for any disruption” and warned U.S. oil companies not to “exploit this moment” by gauging consumers. Biden also vowed once again to take steps to limit pain at the gas pump for Americans, but just how effective that will be is up for debate.
The U.S. doesn’t have “many good options” to fight energy inflation, Isaac Boltansky, BTIG Director of Policy Research, told Yahoo Finance Live. “I’m sure the White House will do everything it can… but I’m just not sold on any of the options that they have really helping consumers.”
President Biden suggested the U.S. may once again tap the Strategic Petroleum Reserve. In November, the White House released 50 million barrels of oil from the reserve in a coordinated effort with other countries to bring down high gasoline prices. The move had a nominal and short-lived impact on prices.
“We’re already at the lowest level of reserves in the SPR since 2002, so we’re already bumping up against constraints there, and frankly, it hasn’t had that much of an impact,” said Boltansky.
The national average gas price in the U.S. is $3.54 a gallon, according to AAA, up from $2.65 a year ago, and experts project gas prices could top $4 as early as next week.
Veteran energy strategist and founder of Energy Word, Dan Dicker, said on Yahoo Finance Live that gas prices could go much higher if the war in Europe drags on.
“My guess is that you are going to see $5 a gallon at any triple-digit [oil prices] … as soon as you get to $100. And you might get to $6.50 or $7,” said Dicker.
On Thursday, Brent crude (BZ=F) — a global benchmark — briefly jumped above $100 a gallon for the first time since 2014, but settled well below the day’s peak.
Oil prices have been kept in check by growing prospects for an Iran nuclear deal that would allow more oil into the global market.
“I do think the entire crisis in the Ukraine is going to lead to a redoubling of efforts to get a deal with Iran signed so that we can get some of their production back in international oil markets,” Boltansky said.
Speculation that Iran, the U.S., and other world powers are close to a deal has gained momentum in recent days.
“There’s also going to be pressure on OPEC nations, but that’s limited as well,” Boltansky added. OPEC+ is expected to stick to its planned March output increases, despite high oil prices.
Another tool at Biden’s disposal to combat high oil prices is to gift Americans a temporary gas tax holiday. That may seem like a no-brainer for a president struggling with low approval ratings in a mid-term election year, but the jury is still out on whether it would benefit consumers or gas producers.
Some officials are also concerned it would be challenging to end the gas tax holiday once it’s rolled out. It’s estimated that a gas tax holiday would reduce gas tax revenues by $20 billion dollars this year, according to the nonprofit Committee for Responsible Federal Budget. That revenue helps cover things like highway construction projects and mass transit.
“A gas tax holiday still hasn’t gained enough traction [in Congress] right now for us to deem it as probable,” said Boltansky. “It’s definitely part of the conversation, but we’re talking about on the federal side [saving] 18 cents per gallon. It’s not a game changer.”
Alexis Christoforous is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AlexisTVNews.