AYESHA RASCOE, HOST:
The Russian military buildup that's threatening Ukraine is also driving up global energy prices. Oil has come close to $100 a barrel, which we haven't seen since 2014, and U.S. sanctions on Russia could push prices higher. President Biden says defending freedom will have costs, but he also wants to protect Americans' pocketbooks.
(SOUNDBITE OF ARCHIVED RECORDING)
PRESIDENT JOE BIDEN: I want to limit the pain that the American people are feeling at the gas pump. This is critical to me.
RASCOE: NPR's Camila Domonoske joins us to talk about how oil markets are reacting and what's ahead. Hi, Camila.
CAMILA DOMONOSKE, BYLINE: Hi, Ayesha.
RASCOE: So oil prices are already close to $100 a barrel. How much worse could this get?
DOMONOSKE: Well, remember that prices were relatively high even before this crisis. And just the risk that a war could affect supply is what's already pushed prices up to here. So if things deteriorate, we really could see a dramatic jump.
Some analysts think we could set new records, and that's because Russia is a major oil and natural gas producer. It's in the top three, right up there with the U.S. and Saudi Arabia. Battles could disrupt pipelines. Sanctions could block exports, or Russia could slash exports to Europe strategically. Any of those things mean supply goes down and prices go up.
RASCOE: So Biden talked about pain at the gas pump. What do you know about how this is already affecting Americans?
DOMONOSKE: Yeah, these are global markets, right? So price changes are felt here. U.S. oil companies will rake in profits, but I think most people are more interested in how this affects consumers. And, yeah, gasoline prices are absolutely the most obvious effect, and they're already about a third higher than they were a year ago.
But higher energy prices also push up prices across the board. They've already helped drive inflation to its highest level in 40 years, and we could see worse.
RASCOE: What can the White House really do about this?
DOMONOSKE: Well, so far, they've avoided direct sanctions on oil and gas exports, which would hurt Russia the most out of the sanctions but would also hurt oil and gas consumers. Those do remain on the table as a possibility, though.
In terms of how to push prices down, options are kind of limited. There's talk about a holiday from gas taxes or releasing oil from strategic reserves, which Biden tried in the fall, and it didn't really work. He's talked about working with oil producers, presumably including OPEC, but OPEC has already resisted calls to boost production. You know, meanwhile, the White House is also trying to figure out how to help Europe, which would be much more affected by this crisis than the U.S. because they're reliant on Russia for a good chunk of their natural gas, which is used for heat and electricity.
RASCOE: Right. So we've talked a lot in recent days about these natural gas pipelines between Russia and Europe. So what can the U.S. do to help Europe if supplies get cut off?
DOMONOSKE: Yeah, it's interesting. The U.S. is now the world's top producer of natural gas, and a lot of it is already going to Europe. But the thing is, you need specialized facilities in order to load this natural gas onto ships. And I spoke to Emily McClain, the head of gas markets at Rystad Energy.
EMILY MCCLAIN: All facilities here in the U.S. are operating at max capacity. So as a result of that, there really isn't much more that the U.S. can do.
DOMONOSKE: So with this running flat-out already, it's just going to be tough to make up for Russian supplies if they go missing.
RASCOE: So really quickly, is there anything that could push oil prices down, even if the situation in Ukraine doesn't improve?
DOMONOSKE: Yeah. There's a huge wildcard here, which is Iran. If there is a new nuclear deal that takes off U.S. sanctions, which are keeping oil off of markets, that could shift the global balance and bring prices down quite rapidly.
RASCOE: All right. We'll leave it there. NPR's Camila Domonoske, thanks.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.