Russia Is A Major Supplier Of Oil To The U.S.

There is a lot of discussion in the West about what a military conflict between Russia and Ukraine will do to oil prices.

Russia is the largest oil producer in the world. Russia produced over 10 million barrels per day of crude oil and natural gas in 2020. That was good for second place behind the U.S. Saudi Arabia had 9.3 million BPD.

The U.S. consumes more oil than Russia or Saudi Arabia. Russia and Saudi Arabia are major crude oil exporters, while the U.S. is a net importer.

The U.S. economy is more vulnerable to oil price shocks than Russia and Saudi Arabia are. There will be a $5-$20 premium on oil prices if Russia invades Ukraine, according to various talking heads.

The primary concerns of a Russian invasion are oil and natural gas. Ukraine is an important transit location for oil and gas. Russian sanctions could reduce the available oil supply in a tight market. Russia could still make money selling oil to countries that don't abide by the sanctions.

There is a question of how sanctions on Russia might affect the U.S. market. The U.S. imported over 8 million barrels of crude oil from all over the world. Canada was the top supplier. This is the reason why the tar sands project was important. Russia was second at 595,000 BPD, followed by Mexico. Saudi Arabia was the 4th largest supplier.

Russia supplied a significant number of crude oil to the U.S. Replacing that oil will put additional upward pressure on global oil prices if the situation gets worse.

The situation got worse as I was finishing the article. Russian troops have been ordered into the region. The oil markets are going to be interesting.

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