The latest Russia-Ukraine news: live updates

Credit…Tyler Hicks/The New York Times

A Russian invasion of Ukraine could drive up already high oil and natural gas prices, prolong high inflation around the world, and deal a blow to any country dependent on Russia for energy.

Oil and gas prices have been rising for months as exporting nations like Libya grapple with production issues and demand has recovered rapidly after two years of the pandemic. But all that pales in comparison to what could happen if a war in Eastern Europe and possible Western sanctions against Russia cut that country’s output, analysts said.

Russia produces 10 million barrels of oil a day, around 10% of global demand, and is Europe’s largest supplier of natural gas, an essential fuel for power plants and for heating.

The United States is not a big importer of Russian oil – it receives about 700,000 barrels a day, or about 3% of its demand. But even Americans would be hurt because the price of the commodity is fixed in world markets.

Nobody really knows what Russian President Vladimir V. Putin intends to do in Ukraine, and most analysts agree that a war would harm his country as much as the rest of the world, if not more. , given the energy dependence of the Russian economy. Yet by simply mustering tens of thousands of troops near the Ukrainian border, Mr. Putin has created the kind of threat to the global energy market the world has not seen since the end of the Cold War.

“Governments had hoped those days were over,” said David W. Goldwyn, who was a top State Department energy diplomat during the Obama administration. “No one was playing for a cut of Russian oil and gas from the world market.”

Oil prices have hit well over $90 a barrel – their highest levels since 2014 – in recent days as war fears have grown. Many energy experts say an invasion would easily push the price above $100 a barrel. The average price of regular gasoline in the United States has risen to nearly $3.50, up nearly 20 cents in the past month and nearly $1 higher than a year ago, according to AAA. Diesel prices have increased by a penny a gallon every day recently.

Higher fuel prices hurt rural and working-class consumers the most, because they spend a higher percentage of their income on energy and because they typically drive longer distances in less fuel-efficient cars. For every penny a gallon of regular gasoline increases, it costs U.S. consumers $4 million a day, said Tom Kloza, global energy analysis manager for Oil Price Information Service.

“We’re going to push the envelope with inflation seeping into every nook and cranny of the economy,” Kloza said. “I’m mostly concerned about diesel. It doesn’t cause a public outcry like gasoline, but it can be a silent trade and profit killer.

Oil markets rose about 2% on Monday. They eased early in the day as traders took note of reports that Russian officials remained open to negotiating a potential settlement before rising again in the afternoon. Natural gas prices in Europe increased by around 6%.

The greatest immediate threat from an invasion would be Russian natural gas exports through Ukrainian pipelines to Europe. If the gas stopped flowing, many Europeans could struggle to heat their homes. Utilities may have to cut power generation and factories may have to shut down sooner. Mr Putin could also seek to further increase pressure on the West by restricting oil exports to Europe.

These measures would, of course, hurt Russia and make the economic sanctions promised by the Biden administration and its allies all the more punitive. This threat could turn out to be the main reason why Mr Putin is finally looking for a compromise.

There are reasons to hope that an energy crisis can be avoided. The United States has produced more oil in recent weeks, and the Biden administration is pushing to revive a nuclear deal with Iran that would release up to a million barrels a day to the global market.

The European winter was relatively mild and the wind was blowing much stronger than last year, easing the pressure on the wind sector. Additionally, the Biden administration succeeded in sending more liquefied natural gas to Europe by persuading Japan and other Asian consumers to forgo some shipments.

But global oil production failed to keep up last year with growing demand despite the lingering pandemic. Production in several members of the Organization of the Petroleum Exporting Countries has declined and there have been production disruptions outside the cartel, notably in Ecuador and Kazakhstan, due to natural disasters and political unrest. The renewed political tension could also tip Libya into civil war, which could jeopardize 300,000 barrels or more of production.

“The mere threat of war and disruption can be enough to send prices skyrocketing,” said Nishant Bhushan, senior oil market analyst at Rystad Energy, a consultancy.

At the same time, many commuters have given up on public transport for fear of contracting the coronavirus and are driving more.

US oil companies have gradually increased production, although they are not yet pumping the roughly 13 million barrels per day they were in 2019. Reduced investment in exploration and production due to the pandemic, and declining investor interest in oil and gas for environmental reasons, stretched thin supplies.

Oil executives remain cautious, in part because they have borrowed heavily in recent years to support production and prices have fallen. Some leaders also said they find it difficult to predict and react to geopolitical developments.

“If Putin invades, then oil goes over $100 to $120 a barrel,” said Scott Sheffield, chief executive of Pioneer Natural Resources, a major oil and gas company in Texas. “If Biden lifts sanctions on Iran, there will be a $10 drop.”

He added, “Demand is strong and there is not enough long-term supply, so oil will eventually break above $100 anyway.”

Credit…Alexei Malgavko/Reuters

Rising oil prices also pose a threat to policies aimed at curbing climate change. As prices rise at the pump, some lawmakers and voters may become more willing to support increased oil and gas production, seeing it as a more immediate solution to high energy prices than investing. for example, in renewable energy and electric cars.

“This is a huge turning point for governments trying to manage energy transition and energy security simultaneously,” said Goldwyn, the former Obama administration official. “The need for adequate oil and gas reserves and diverse sources of supply is more urgent than ever during an energy and geopolitical crisis.”

Some energy analysts said the high prices may not persist that long. Indeed, people may seek to reduce their expenses, for example by driving less or switching to more efficient vehicles and appliances. A report released on Monday by analysts at RBC, an investment bank, forecast that oil prices could reach $115 a barrel or higher this summer. He added: “The oil cycle will rise until it finds a level of demand destruction.”

The recent spike in gas prices comes at a time of year when people tend to drive less. For some energy experts, this is worrying because a seasonal price increase is not that far away.

“Not only are oil prices up, but most of the nation is beginning the months-long transition to summer gasoline, further adding to the upside at the pump,” said Patrick De Haan, head of petroleum analysis at GasBuddy, a technology company. that tracks fuel prices.

A diplomatic settlement, of course, would ease the pressures and lower energy prices.

“Average prices in 2022 could be lower than in 2021 with more supplies from the United States and the Gulf, including Iran,” said Rene Ortiz, former OPEC secretary general and former minister. oil in Ecuador. “It’s the best-case scenario, and I think diplomacy will prevail. It would be crazy for Putin to invade.

Christi C. Elwood