President Joe Biden’s ban on Russian oil imports will likely not have much of an impact on gas prices in Wyoming and the United States, Wyoming’s head economist told Cowboy State Daily Wednesday.
Wyoming chief economist Wenlin Liu said because Russian oil makes up less than 3% of the total oil imports into the United States, the ban will have little impact on the global oil market.
“Oil is a global commodity and its price is decided by demand and supply of the whole world,” Liu said. “Before COVID, the exploration activity responded very quickly as prices increased. However, this round is quite different, for both the U.S. and Wyoming, the drilling activity increase has been much slower, despite the fast recovery in prices as producers continue to limit spending and investment.”
On Tuesday, the national average price of gasoline in the United States broke a record, hitting an all-time high of $4.10 per gallon. The national average price of diesel is also nearing a record and is currently sitting at $4.63 per gallon.
The average gas price in Wyoming was $3.92 per gallon as of Wednesday, an increase of 44.4 cents from one week ago and around $1.19 from one year ago.
The national average increased by about 72 cents from a month ago, including 55 cents in the last week.
GasBuddy petroleum analyst Patrick DeHaan said Tuesday that sanctions Biden had put into place against Russia before the ban had already slowed the Russian oil imports to a trickle, so the ban wasn’t necessarily a surprise to the oil and gas market.
“[Gas] prices will continue to increase across the U.S. and Canada, but at least for now, the pace of increases will probably start to slow down,” DeHaan said. “You shouldn’t have to worry about going outside and seeing price increases of 40 cents per gallon.”
Liu noted that oil prices were very volatile in recent months, even before the Russian invasion of Ukraine last month. The main reason for this was demand supply imbalance, with demand increasing as concerns over COVID wane and countries relax related restrictions.
He also noted that if oil producers increase their investment in drilling, it would also boost Wyoming’s energy and overall economic conditions, as mineral extraction has always been Wyoming’s driving industry.
“The (Consensus Revenue Estimating Group) forecasts for Wyoming oil prices are $60 per barrel in 2022, and $55 per barrel in both 2023 and 2024, and assumes that Wyoming prices are about $5 lower than the national benchmark prices,” Liu said. “Assuming CREG production is correct, the total mineral revenue would increase by $120 million if oil prices are $10 per barrel higher than forecasts.”
The CREG is a group of economists and fiscal analysts who work for various state departments.
While Liu does believe the Russian invasion will have an impact on the already tight global energy market, he does not think it will have much effect on natural gas prices in the United States, since the market here is mostly domestic.
