STEVE INSKEEP, HOST:
How can the United States make sure that an oil ban hurts Russia more than it hurts the United States? President Biden yesterday targeted Russia's most important export.
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PRESIDENT JOE BIDEN: We're banning all imports of Russian oil and gas and energy. That means Russian oil will no longer be acceptable at U.S. ports, and the American people will deal another powerful blow to Putin's war machine.
INSKEEP: The announcement affected oil markets, where prices were already rising, and they have exceeded $120 per barrel. Gas prices are also up well over $4 per gallon on average, and the people paying include Orlando Rojas (ph) from Los Angeles.
ORLANDO ROJAS: It's not doable, man. A hundred bucks every two, three days? It adds up - $400 a month. It's not fair. It's really not fair. And they're not giving us any option.
INSKEEP: Our next guest is Denton Cinquegrana, who is chief oil analyst at the Oil Price Information Service, or OPIS, which provides independent information to the oil industry. Welcome.
DENTON CINQUEGRANA: Good morning. Thanks for having me.
INSKEEP: How significant is it that the United States alone is making this move?
CINQUEGRANA: I think it's really more symbolic than anything. You know, one of the things that's really happened over the past couple weeks is the industry itself almost put a ban - basically, put a ban on Russian crude oil in that a bank would not issue a line of credit for a company that may want to buy one. Shipping companies, the boat owners, the ship owners, wouldn't go into the Black Sea to load crude oil because of the insurance premiums that are involved 'cause it's considered a war zone. So, you know, it was almost a de facto ban before the president's announcement yesterday, but the president's announcement yesterday morning just makes it official.
INSKEEP: Is this enough of a change, then, to hurt Russia?
CINQUEGRANA: It probably is because, you know, they're still going to send some crude oil to China through various pipelines where they're connected, India may buy some a little bit here and there, but for the most part, it does deal another blow to the Putin administration. And also, you know - I know European - the continent of Europe will continue to bring some crude oil in, but they're going to find it difficult as well when ships will not bring it to the various ports throughout the world.
INSKEEP: Mr. Cinquegrana, can you help me with something? I've been through a lot of crises where oil prices went up, and when gas prices also soar, as they now are soaring, I personally have my doubts because I presume the gas that I bought this week is oil that was drilled somewhere many, many months ago and sold at much cheaper prices months ago. So why should my gas price already be going up so much so soon?
CINQUEGRANA: Granted, oil transacts multiple times before it meets its final destination, and the same with gasoline. So as you get downstream throughout the terminal, the price becomes a lot more real time than it did when something was, you know, produced - you know, the oil that came out of the ground several weeks and perhaps even months ago, maybe it was taken out of storage, for example. But the way gasoline works, it's a lot more real time, and inventories work on a just-in-time basis. So that's the way the gasoline industry has worked for quite some time. So - but I do...
INSKEEP: So you don't think that oil companies are profiteering here?
CINQUEGRANA: I think, obviously, they're profiting because of the high price right now, but the guy you're buying your gasoline from on the corner in your - at your local station, he's certainly not. He's selling gasoline at a very slim margin right now. And those margins are slim to begin with. But in some cases throughout the country, based on some of the data we're seeing, is they're selling gasoline at a loss.
INSKEEP: Thank you for that. Let's ask about replacing this oil from Russia. U.S. officials have been reaching out to Saudi Arabia. They've been reaching out to Venezuelan officials in some way that's a little bit unclear, which is prompting a lot of pushback, especially from Republicans in Congress who are saying, why reach out to Venezuela? Does it make any sense to reach out to Venezuela for their oil? Now, based on the statements of Biden administration officials, it's not clear to me they really are reaching out for Venezuelan oil. But would it make any sense to do that?
CINQUEGRANA: I guess at this point, you know, with - you know, there's an all-hands-on-deck approach. And I'm not going to get into the politics and the geopolitics of that particular piece. But, you know, what you need is a sort of a replacement crude. Not all crude oils are the same, essentially. So you have different qualities. And refineries in the U.S. have invested billions and billions of dollars over the last, you know, 20 or so years to be able to bring in heavy, sour, just cruddy crude to be able to run at their refineries and turn into usable products - gasoline, diesel, jet fuel, et cetera - and to take advantage of the difference between light sweet crude and heavy sour crude. A lot of that crude - that comes from Russia. And some of the, you know, kind of refinery feedstocks, if you will, to refer to them, is also this heavy, sludgy stuff that, you know, refineries there cannot turn into anything usable, but U.S. refineries can.
So it's more about replacing that. Canada would be a good start, actually. And even some very little bit of domestic production and even Mexico. So there's other options out there. It's - but, you know, it's a challenge to replace this at the snap of a finger.
INSKEEP: Well, let's just very briefly follow up on that. Can the United States make up the difference on its own? Because that's another political talking point right now.
CINQUEGRANA: Well, when you consider the fact that - you know, if Russia was completely cut off from the world markets, that's about 3 to 4 million barrels a day. I think U.S. production could go up. I don't - I'm not quite sure it could go up that much. And, you know, it takes time. The drillers in West Texas, they need some time to bring oil to the market. I like to use the, you know, seven and seven and not the cocktail - but on-land drilling production takes about seven months from start to finish, and then deep water - Gulf of Mexico, think - seven years to bring that oil to market.
INSKEEP: Wow.
CINQUEGRANA: So there's that time lapse. But you also have the fact that, like everything else in this country right now, there's labor shortages.
INSKEEP: And things take time. Denton Cinquegrana, chief oil analyst of the Oil Price Information Service. Thanks very much for your insights.
CINQUEGRANA: Sure. Transcript provided by NPR, Copyright NPR.